Wheat rallies nearly 3pc on dimming world crop prospects

CHICAGO: US wheat futures rallied almost 3 percent on Monday on concerns that deteriorating crops in several key producing countries will tighten global stocks of the grain.

Corn scaled to a 1-1/2-month high on spillover support from wheat and as dry conditions in parts of the U.S. corn belt trimmed harvest prospects, while soybeans touched a three-week high.

Investors exited short positions in grains as poor weather in the EU, Australia and top exporter Russia has dented wheat crop prospects following several years of plentiful supplies.

The International Grains Council last week projected world wheat production would sink to a five-year low.

"The reports out of Europe are leading the wheat," said Roy Huckabay, analyst with Linn & Associates, a Chicago-based brokerage. "The question is how big is the Russian crop and how strong will the Russian prices get."

Large speculators narrowed their net short position in the Chicago Board of Trade soft red winter (SRW) wheat market last week and expanded their net long position in hard red winter (HRW) wheat as global production prospects dimmed, according to Commodity Futures Trading Commission data.

Russian wheat export prices rose sharply last week for a second week in a row as rains stalled harvesting in parts of the country.

U.S. wheat prices, meanwhile, were the lowest offered in a recent international tender by Iraq.

CBOT September SRW wheat jumped 16 cents, or 2.9 percent, to $5.46-1/2 a bushel, while September HRW futures  gained 15-1/4 cents, or 2.9 percent, to $5.47-3/4 a bushel.

Worries that dry weather would trim yield prospects lifted corn and soybean futures. The U.S. Department of Agriculture is expected to lower its condition ratings for both crops by about a point in a weekly report due later on Monday.

CBOT September corn rose 5-1/4 cents, or 1.5 percent, to $3.67-1/4 a bushel, the contract's highest since June 18. CBOT September soybeans rose 5-1/2 cents, or 0.6 percent, to $8.80-3/4 a bushel.

U.S. soybeans were being quoted at a deep discount to supplies from Brazil, prompting a pick-up in demand from many countries even as China, the world's top buyer of the oilseed, continued to shun U.S. soybeans because of the two countries' trade disputes.

Traders say China will be forced to pick up some U.S. soybeans to meet its needs in the months ahead as South American supplies dwindle.