CHICAGO, June 13 (Reuters) – U.S. spring wheat futures jumped 3.2 percent to a two-year high Tuesday morning, pulling soft red winter wheat and hard red winter contracts higher on growing worries about crop health in the dry U.S. Plains, traders said.
The rally stemmed from the U.S. Department of Agriculture weekly crop condition report released Monday afternoon that showed crop conditions down 10 percentage point from a week ago and well below market expectations.
“USDA cut its assessment of the spring wheat crop sharply for the second straight week, knocking more than three bushels per acre off yield potential according to our models,” Farm Futures senior analyst Bryce Knorr said in a note to clients. “That could trim 30 million bushels off the total wheat crop.”
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The main problem with U.S. spring wheat is the lack of rain causing crop stress.
Rain is falling today in the Dakotas as well as in southern Alberta and eastern Saskatchewan. More rain is expected Wednesday.
In morning trade, Minneapolis spring wheat was trading about three percent higher.
Weather concerns also sparked buying in corn and soybean futures, which firmed as new forecasts for key Midwest growing areas indicated less rain than earlier outlooks.
Traders noted some bargain buyers stepping in to the corn and soybean market, adding further support, following declines on Monday.
Monday’s USDA crop condition report assessed the spring wheat crop at 45 percent good-to-excellent as of June 4, down 10 percentage points from a week earlier. Analysts had been expecting a good-to-excellent rating of 53 percent.
“When a weather risk is seen in one sector of the grains and soybean complex, investment funds tend to add risk premiums into other sectors regardless of whether increased risk is visible,” said Matt Ammermann, commodity risk manager at INTL FCStone. “If there are issues with spring wheat now you have to ask yourself whether there will be issues with soybeans and corn.”
U.S. soybeans were rated by the USDA at 66 percent good-to-excellent, compared with forecasts for 69 percent. U.S. corn was at 67 percent good-to-excellent, matching analysts’ forecasts.
