PARIS/CANBERRA: Chicago wheat futures rose more than 2% on Friday as reports of Israeli missile strikes in Iran fuelled fears of an escalating conflict in the Middle East, before paring nearly half of their gains as Tehran played down the incident.

Soybeans and corn were also higher, although to a lesser extent, but all three contracts were hovering close to their lowest levels since 2020 amid plentiful supply.

The most-active wheat contract on the Chicago Board of Trade (CBOT) was up 1.2% at $5.59-3/4 a bushel, as of 1120 GMT, having risen nearly 4% after the first reports of the strike emerged.

CBOT corn was 0.7% higher at $4.39-1/2 a bushel and soybeans were up 0.2% at $11.51 a bushel.

Oil prices also pared their gains after having surged more than 4% amid concerns that Middle East oil supply could be disrupted.

Traders had feared that expanding violence in the Middle East could impact shipments in the region and from Russia, the world’s biggest wheat exporter and an ally of Iran, said Commonwealth Bank analyst Dennis Voznesenski.

Higher oil prices exert upward pressure on ethanol and its feedstocks, which include corn and soybeans.

Wheat prices remain under pressure from the strong supply of wheat from Russia, soybeans from South America and corn from South America and the United States.

The US dollar this week rose to its strongest against a basket of major currencies since November, making US farm exports less competitive.

US soybeans are being out-competed by beans from top producer Brazil, and a plunge in the value of the Brazilian real has triggered a rush of sales by farmers there.

In other crops, the International Grains Council cut its outlook for 2024/25 global corn production by 7 million tons to 1.226 billion tons and for wheat production by 1 million tons to 798 million tons, though both estimates are still increases from the previous season.

Traders are monitoring leafhopper insect plague in Argentina’s corn fields and dry weather in portions of the US wheat belt, which could tighten supply.

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