Chicago Board of Trade (CBOT) soybean futures rose to a two-month high on Wednesday on forecasts for warmer and drier weather that poses a threat to the developing U.S. soybean crop.
"Weather models turned drier and even warmer for next week, and that will cause further degradation of soybean conditions," said Global Commodity Analytics analyst Mike Zuzolo. "So that's what took soybeans higher today."
Corn and wheat futures also inched upward on spillover buying from the solid gains in soybeans, with old-crop or spot September corn rising 14-1/4 cents, or nearly three per cent, to $4.98 per bushel on tight stocks of corn, slow farmer selling and firm cash markets (all figures US$).
CBOT new-crop November soybeans closed up 13-1/2 cents at $13.04, new-crop December corn was up 7-3/4 cents at $4.83-1/4, and September wheat was up 4-1/2 cents at $6.38-3/4.
Traders, analysts and crop experts said there was concern about forecasts for heat and dryness into late August in the U.S. Midwest. The soybean crop is in its pod-setting stage of development, and hot weather and lack of moisture during this stage can cause pods to abort the seeds and reduce soybean yields.
"The soy complex is firming because there are ongoing weather concerns," said Sterling Smith, a futures specialist for Citigroup.
The U.S. corn crop is filling kernels and ears, a less weather-sensitive development point, but corn yields may yet be scaled back because of heat and dryness.
Meteorologists were expecting an atmospheric high-pressure ridge to develop over the Midwest by the weekend, which would increase temperatures and block moisture from moving into the crop belt.
"At least a third of the crop belt will remain dry for filling crops, with the greatest threat to soybean yields," said Joel Widenor, a meteorologist for Commodity Weather Group.
"Warm temperatures will also prevail, aiding growth rates but adding to stress as the highs reach the low to mid-90s F next week," he said.
Andy Karst, a meteorologist for World Weather Inc, said, "There's enough soil moisture in most areas for now, but crops will need some rain by September to avoid damage."
Gains in soybean and corn futures were slowed by reports of potential bumper yields for both crops from a U.S. crop tour.
ProFarmer crop scouts on an annual tour in the Midwest reported excellent yield potential for corn and soybeans in Indiana and Nebraska. However, the crops were lagging normal maturity, leaving them vulnerable to harm from late-season dryness or an early frost.
Chip Flory, ProFarmer crop tour leader, told the Reuters Ag Forum on Wednesday that the Iowa corn crop was about two weeks behind normal maturity.
"Moisture requirements at this stage of development are 0.3 inch per day. With normal temperatures, the crop needs 1.2 inches of rain per week to maintain yields and help fill kernels," Flory said.
Soybean plant growth in western Iowa has been stunted by late planting, cool temperatures and dry conditions, he said.
"The plants are doing what they can, but pod counts are low in western Iowa and seed development is well behind normal," Flory said. "The Iowa bean crop may end up being a bigger story than the Iowa corn crop."
Corn and soybean fields in southern and southwest Illinois were as much as a month behind schedule on development, which could drag down yields at harvest, the crop tour scouts said.
-- Sam Nelson
is a Reuters correspondent covering grain and oilseed futures market from Chicago.