US wheat futures rallied to near 2-1/2 year highs on Friday as concerns mount about yields from the US winter wheat crop and as commodities were helped by stronger oil prices. Chicago Board of Trade (CBOT) wheat for March delivery gained about 0.3 percent to $8.61-1/2 per bushel by 0338 GMT, recovering from a 0.5 percent fall on Thursday as US weekly exports of the grain failed to meet market expectations.
"We've had a positive start in the Asian market as we're seeing stronger US crude oil and that's extending into the grains market along with a slightly weaker dollar," said Luke Mathews, an agricultural commodities strategist with Commonwealth Bank of Australia.
"One of the disappointing factors was US wheat exports coming in much lower than expected - the market really does need extremely strong US export sales to be able to hold on to the rally we've seen in the last week," said Mathews. CBOT wheat futures are heading for a five percent gain over the week as a massive winter storm sweeping across the United States poses a threat to yields from the country's hard red winter crop.
More cold weather is expected next week. The winter crop is vulnerable as recent dry weather means there is a lack of adequate insulating moisture. The extent of damage will be difficult to assess until this year's winter wheat crop breaks dormancy. US corn futures for March delivery rose 0.49 percent to $6.65-3/4 per bushel, boosted by US crude oil futures rising towards $91 per barrel. For the week March corn is heading for a four percent gain to take it close to its highest level in 2-1/2 years.
Oil rose on concerns over unrest in Arab countries and a cut in natural gas production in the United States due to cold weather. Crude has a strong correlation to corn which is used to make ethanol in the United States as well as for livestock feed. Corn hit a 30-month high on Wednesday on tight global supplies but succumbed to profit-taking on Thursday despite strong-than-expected weekly US exports. Prices remain vulnerable to more dry weather in Argentina ahead of the world's second largest corn exporter's up-coming harvest.
The US Department of Agriculture last month cut its estimate for the 2010/11 Argentine corn harvest to 23.5 million tonnes from 25 million tonnes previously. Soybean futures for March delivery were almost flat, rising 0.1 percent to $14.37 per bushel, under pressure from the start of what is expected to be a record harvest in Brazil, the second-largest oilseed exporter after the United States. For the week the December soybean contract is in line for a gain of 3 percent. It is also close to a 2-1/2 year high, supported by ongoing export demand for US beans.