U.S. soybean futures rose to their highest level in nearly two weeks on Monday as investors raised risk premiums amid concerns over dry weather in parts of southern Brazil, with prices extending their biggest weekly gain in three months.
After the worst drought in half a century slashed the size of this year's crop in the United States, importers are hoping for bumper harvests in Brazil and Argentina to help drive down prices that rallied to an all-time this past summer.
Chicago Board of Trade (CBOT) corn futures ended nearly flat, losing early gains fuelled by a pick-up in export demand last week due in part to reduced competition from South America and Europe. Dry weather in the southern U.S. Plains lifted wheat.
Wheat found support on expectations for the health of the winter wheat crop in the southern Plains to continue deteriorating amid a lack of rain.
A Reuters poll of 10 analysts showed 33 per cent of the U.S. winter wheat crop was likely in good-to-excellent condition last week, down one percentage point from the previous week. A year ago, the crop was 52 per cent in good-to-excellent condition and the five-year average is 54 per cent.
The U.S. Department of Agriculture's weekly crop progress report issued after the market closed showed that 33 per cent of the winter wheat crop was in good to excellent condition.
The southern Plains grow mostly hard red winter wheat, which is traded on the smaller Kansas City Board of Trade. The Chicago Mercantile Exchange, which owns the CBOT, said in October it would acquire the KCBT for $125 million in cash (all figures US$).
KCBT wheat futures posted bigger gains than for soft red winter wheat in Chicago and hard red spring wheat at the Minneapolis Grain Exchange.
Corn found early support on from funds after the March contract closed above the 50-day moving average on Friday.
"It was the first time March corn has closed above the 50-day moving average since Sept. 11 and that could be a buy signal to funds," said Brian Hoops, president of Midwest Market Solutions in Springfield, Missouri.
Speculators bull up on corn
"And soybeans are being helped by talk that southern Brazil is drier than desired," Hoops added. "Traders are a little nervous that yields could be trimmed a little."
CBOT December corn ended 0.2 per cent higher at $7.47-1/4 a bushel. December CBOT wheat rose 0.2 per cent to $8.49 per bushel while December KCBT wheat climbed 0.7 per cent to $8.84-1/4 per bushel.
January soybeans gained 0.4 per cent to $14.24-3/4.
The weekly U.S. Commodity Futures Trading Commission's (CFTC) Commitment of Traders report showed that large speculators, including hedge funds, raised their bullish bets on CBOT corn futures and options by 32 per cent in the week to Nov. 20, snapping three weeks of liquidation.
These players cut their net long in soybeans to the smallest level in nine months, while ballooning their net short position in wheat to its biggest level in five months.
Meteorologist Drew Lerner of World Weather Inc. said crop weather in Brazil was mostly satisfactory, with periodic rains expected in most corn and soybean areas over the next two weeks.
However, the first five days will be dry or mostly dry in the south, where some areas are in need of moisture, he said.
"There are some pockets of dryness in southern Brazil that are going to stay with us," Lerner said, adding that the areas included parts of central and eastern Parana and central eastern Santa Caterina, and a few pockets in Rio Grande do Sul.
"They are not critical, but if we go through most of this week and we see net drying conditions, when we get to the weekend, if we don't get a decent rain, then we may have a little dryness to worry about," he added.
Traders said the wheat market was looking for results of new tenders being held by Jordan and Iraq, two major wheat buyers, will could offer a fresh sign of export competition in the coming weeks.
In a previous wheat tender last week, Iraq overlooked U.S. hard red winter wheat, which is seen by traders as still too expensive in contrast to increasingly attractive values for U.S. soft red winter wheat.
-- K.T. Arasu
writes for Reuters from Chicago. Additional reporting for Reuters by Julie Ingwersen and Mark Weinraub in Chicago, Gus Trompiz in Paris and Colin Packham in Sydney.