U.S. grains: Soybeans rally on eroding crop prospects

Chicago | Reuters –– U.S. soybean futures jumped more than two per cent on Friday and registered their first weekly gain in five weeks, helped by signs of improving export demand and expectations that the U.S. government will trim its harvest forecast in a monthly crop report next week.

Corn and wheat futures firmed on support from rallying soybeans and as traders squared positions ahead of next Wednesday’s U.S. Department of Agriculture’s supply and demand reports.

“It’s mostly a bean-led rally. There are some yield concerns before the report next week and demand is starting to pick up a little bit,” said Jack Scoville, vice-president for the Price Futures Group in Chicago.

Analysts polled by Reuters on average called for a cut to forecasts for corn and soybean yields, harvested acres and total production. USDA was also expected to trim its 2014-15 and 2015-16 ending stocks forecasts for both crops.

The production cuts were expected after overly wet weather in parts of the Midwest early this season was believed to have reduced crop prospects.

Crop conditions have stabilized in recent weeks but forecasts indicate a drier pattern for the Midwest in the coming weeks, a particularly critical period for the region’s soybean crop. Also, some corn plants may not have particularly deep roots following the wet spring, so the crop could struggle if weather turns dry.

“We have got a little bit of uncertainty in our weather and we are just putting a little bit of risk premium back in,” said Terry Linn, an analyst with the Linn Group. “If you get into a drying trend, the plants are not going to hold up as well as they normally would.”

Soybean futures drew support from confirmation of a second 132,000-tonne soybean sale to China in two days, although forward sales of new-crop supplies remain well below normal.

Chicago Board of Trade November soybeans gained 20 cents, or 2.2 per cent, to $9.63-1/4 a bushel, adding 2.4 per cent in the week (all figures US$).

Buying accelerated as November futures breached technical resistance at the 100-day moving average of $9.54-3/4, and the contract closed above its 50-day moving average of $9.62-1/2.

CBOT September corn rose three cents to $3.72-3/4, notching a 0.4 per cent weekly gain, its first in a month.

September soft red winter wheat climbed 3-1/2 cents, or 0.7 per cent, to $5.10-1/2. The contract gained 2.3 per cent in the week for its first weekly advance in five weeks.

Karl Plume reports on agriculture and ag markets for Reuters from Chicago. Additional reporting for Reuters by Gus Trompiz in Paris and Naveen Thukral in Singapore.

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