U.S. wheat rose to a three-week high on Friday, posting its biggest weekly gain since July, as drought conditions deepened in the southern Plains wheat belt where the crop was in the worst condition in history before its winter dormancy.
Wheat, corn and soybeans each had their second straight weekly gain, with dry weather in South America also buoying futures at the Chicago Board of Trade (CBOT).
"The ongoing weather worries brought in renewed buying here after some shorts were shaken out of the market," Terry Reilly, analyst at Futures International, said of wheat.
"The overall feature is improved U.S. and China economic conditions, poor U.S. crop conditions and strong global wheat demand. That brought some longs back," Reilly said.
Agriculture commodities traded in both positive and negative territory as traders took profits ahead of the Martin Luther King Jr. Day holiday on Monday in which many U.S. markets will be closed.
"We can take a day or two to breathe, especially ahead of a three-day weekend," said ABN Amro broker Jeff Thompson, adding that volume was light.
Wheat knocked out its high from earlier this week late in Friday's session, enticing a new rebound of buying.
Benchmark CBOT March wheat ended 10 cents, or 1.3 per cent, higher at $7.91-1/4 per bushel, just off the session high of $7.93-3/4 and good for the highest settlement since Dec. 26 (all figures US$). The contract gained five per cent for the week in the second straight weekly gain after not rising for the week since November.
Dry conditions are forecast through the end of the month in the Plains states that grow most of the wheat in the country, John Dee, meteorologist for Global Weather Monitoring, said Friday.
"The hard red winter wheat belt in the Plains looks quiet and dry but cooler next week, but there shouldn't be a cold air threat in the Plains," Dee said.
Still, some weather models showed the possibility of rain by the end of the month.
Hard red winter (HRW) wheat contracts at the Kansas City Board of Trade gained less than soft red winter (SRW) wheat in Chicago, with the closely-watched spread between the two contracts showing the smallest premium of 2013 for HRW wheat over lower-quality SRW.
Severe drought in the Plains left the U.S. winter wheat crop at an all-time low before it entered dormancy, the U.S. Agriculture Department said late last year.
South America dry, too
A turn to dry weather in Argentina and in southern Brazil is beginning to cause concern among crop and market interests, Dee said. "We've gone from too wet to too dry in a hurry. It's not a panic situation but there certainly is a situation where concern about dryness is growing," he said.
CBOT March corn finished three cents higher at $7.27-1/2 per bushel after declining on Thursday for the first time in nine sessions, snapping the longest streak of gains since June. Corn gained more than two per cent for the week, capping the best two-week stretch since July.
Soybeans for March delivery shed one cent to $14.29-1/4 per bushel but gained nearly four per cent for the week in the largest such increase since August. Most deferred soybean contracts also gained.
Private analytics firm Informa Economics raised its forecast for 2013 U.S. corn plantings to 99.303 million acres from 99.026 million, trade sources said on Friday.
If realized, U.S. corn acreage would be the largest since 1936. Informa also cut its soybean acreage estimate to 78.777 million from 78.962 million.
-- Michael Hirtzer reports on the grain and livestock commodity markets for Reuters from Chicago. Additional reporting for Reuters by Sam Nelson in Chicago.