Chicago | Reuters — U.S. soybean and corn futures rose on Tuesday as lower-than-expected crop ratings and increased hopes for a resolution to the U.S.-China trade battle helped to extend a recovery from sharp losses last week.
The markets advanced after the U.S. Department of Agriculture said on Monday that 69 per cent of the soybean crop and 72 per cent of corn were in good to excellent condition. That was down from 71 per cent and 75 per cent a week earlier, respectively.
The declines, attributed to hot and dry weather, raised concerns that yields were declining. Traders also worried that unfavourable weather may hurt fields in August, the key month for soybean development.
“What we’re saying is the crop is not getting bigger,” said Don Roose, president of Iowa-based broker U.S. Commodities. “It’s getting smaller now.”
The most active soybean contract rose 1.1 per cent to $8.55-1/4 a bushel at Chicago Board of Trade (all figures US$). On Monday, soybeans fell to their lowest price in a decade on expectations for big U.S. harvests and fears about the U.S.-China trade dispute, before settling higher.
CBOT corn jumped 1.3 per cent to $3.59-3/4 a bushel.
U.S. soybean conditions are still the sixth highest since 1989, despite the drop in ratings, according to data and analytics firm Radiant Solutions. Corn conditions tie for the 11th highest, the company said.
“Obviously the ratings did get some interest and are worthy of a couple cents move,” said Rich Nelson, chief strategist for Illinois-based broker Allendale.
Traders said hopes for a resolution to the U.S.-China trade dispute helped support gains in the markets. Chinese buyers have loaded up on soybeans from Brazil, instead of the U.S., because of tariffs on U.S. soy that were threatened for weeks and enacted on July 6.
The shift in China’s demand has pushed up Brazilian soybean premiums and pressured U.S. prices. However, U.S. soybean prices are now looking more competitive with Brazilian soybeans, traders said.
“The question is when this price gap between the U.S. and Brazil will get too wide and will need correcting,” said Matt Ammermann, commodity risk manager for broker INTL FCStone. “There is a feeling we could be reaching this point.”
CBOT wheat reached a one-week high on concerns about poor weather reducing harvests in other countries. The most actively traded contract ended up 1.9 per cent at $4.97-3/4 a bushel.
— Tom Polansek reports on agriculture and commodities for Reuters from Chicago; additional reporting by Michael Hogan in Hamburg and Naveen Thukral in Singapore.