U.S. soybean, wheat and corn futures rose on Wednesday, clawing back some of the losses from earlier in the week on renewed worries about crops in the U.S. Midwest hit hard by drought.
Soybeans led the way higher, rising 3 per cent as the market edged back toward record highs set late last week. Wheat jumped 2.8 per cent, nearing a four-year high.
"The market is looking at is the full supply and demand balance sheet," said Nicole Thomas, analyst with McKeany-Flavell. "Even if the weather takes a turn for the better here in the last few stages of the crop's development, we are still looking at a pretty tight stocks situation. We need to get some price rationing."
Some rain was in the forecast for the next 10 days in northern and eastern parts of the Corn Belt, but large production areas in Iowa, Illinois and Nebraska were expected to remain parched.
"The reality of it is we are going to have to see how much rain we are going to actually get," said Sterling Smith, analyst with Citigroup said. "The drought is not over yet."
Better-than-average rainfall was expected next week in Minnesota, Wisconsin, Indiana, Ohio and Kentucky, and in east-central Illinois, predicted Don Keeney, meteorologist for MDA EarthSat Weather.
Some rain also was expected in northern and eastern areas this week, but crops in the rest of the growing region will struggle against extreme heat and drought.
Corn's gains lagged behind wheat and soybeans, weighed down by weakness in the cash market. Traders also said that the crop's woes were already baked into the market and the poor conditions could not support a push back toward last week's records.
Unwinding of corn/soybean spreads and corn/wheat spreads also contributed to corn's relative weakness compared to other agricultural commodities.
"Wheat is quite a bit higher, beans are sharply higher and corn is barely higher, that tells me that we are already seeing some of that fund (activity) going on," said Jim Hemminger, senior risk manager with Top Third Ag Marketing.
Chicago Board of Trade November soybeans rose 46 cents to $16.15-1/2 a bushel. CBOT December corn was 9-3/4 cents higher at $7.88 a bushel and CBOT September wheat gained 24-1/2 cents to $9.03-1/4 a bushel.
The drought sparked a month-long grains price rally that saw U.S. corn and soybean prices hitting record highs on Friday, raising concern about rising global food prices. But prices notched their biggest declines of the summer on Monday and Tuesday on forecasts for rain.
The sharp drops of Monday and Tuesday, as well as field reports of devastated crops and reduced harvest estimates, generated interest from bargain buyers who quickly boosted prices.
Crop experts saw variability in corn fields in central Illinois on Wednesday, with yield estimates topping 2011 in Logan and Sangamon counties but dropping below last year in Menard County.
Concerns about a cut in Russian wheat exports because of drought in the Black Sea region also lent support to wheat.
Bullish outside markets, including a falling U.S. dollar, added further strength. The dollar weakened from its two-year high against the euro, signalling that investors were more likely to add risky positions to their portfolios.