Chicago Board of Trade wheat jumped 3.8 per cent Wednesday, its biggest daily rise in six months, as concern about poor U.S. crop weather and expectations of strong global demand for U.S. supplies sparked a flurry of fund short-covering, traders said.
Corn edged higher in choppy trade, stabilizing after three straight losing sessions following last week's U.S. Department of Agriculture (USDA) report, which surprised investors with estimates of big U.S. corn and wheat stockpiles.
Soybeans fell on worries that feed demand in China might be slowing with a new avian flu strain emerging, and as traders unwound long soy/short corn spread positions.
At the CBOT, front-month May wheat settled up 25-3/4 cents at $6.96-1/2 per bushel, its biggest single-day rally since Sept. 28 (all figures US$).
May corn ended one cent higher at $6.41-1/2 a bushel and May soybeans finished down 13-3/4 cents at $13.80-1/4 a bushel.
Wheat rose in part on concerns about dry conditions in the southern U.S. Plains. Welcome rains are forecast for the region this week but may miss the southwestern portion of the belt.
Expectations of fresh export demand in response to the sharp drop in CBOT wheat prices this week to a nine-month low added support.
CBOT floor traders cited rumors that China's Sinograin bought 10 cargoes of U.S. soft red winter wheat, but some analysts were skeptical, noting that cash values for wheat at the U.S. Gulf export terminal showed little change.
China's state-owned agricultural trading company, Cofco, has complained about the baking performance of some Canadian spring wheat shipments and suggested it may import more U.S. spring wheat instead.
"U.S. wheat is supposedly the cheapest in the world, even cheaper than Australian. A combination of those things, with the funds being short, has made wheat the upside leader," said Jim Gerlach, president of A/C Trading in Fowler, Indiana.
CBOT traders estimated that commodity funds were net buyers of 11,000 CBOT wheat contracts on Wednesday. Funds held a net short position in CBOT wheat as of last week, data from the U.S. Commodity Futures Trading Commission showed.
Cold weather in Europe lifted European wheat futures. A wave of cold weather across France in recent weeks could hit grain crop yields by five to six per cent if it lasts beyond mid-April, a scientist at the French National Institute for Agricultural Research said.
Corn ends firm in choppy trade
CBOT corn settled higher after a choppy session as the market tried to find its footing after plunging roughly $1 per bushel, or 13 per cent, since USDA's blockbuster quarterly stocks report last week.
The government pegged U.S. corn stocks as of March 1 at 5.4 billion bushels, well above the average analyst estimate of about five billion. Stocks of soybeans and wheat also came in above expectations.
Commodity funds sold an estimated 81,000 corn contracts in the three sessions after the report's release, and open interest in CBOT corn fell by more than 40,000 contracts this week. By Wednesday, fund liquidation appeared to have slowed but continued to hang over the market.
"With wheat being 10 to 20 cents higher, I am shocked that corn is not higher. It tells you there is still massive length in that market that has to get cleaned up," said Mark Schultz, analyst at Norhtstar Commodity in Minneapolis.
Light pressure stemmed from news that private analytics firm Informa Economics raised its estimates of 2012-13 corn production in Argentina and Brazil and 2013-14 production in China.
Informa estimated Brazil's 2012-13 corn crop, which is currently being harvested, at 71.95 million tonnes, up from 71.6 million previously, and Argentina's corn harvest at 25.3 million tonnes, up from 25 million previously.
The firm raised its forecast for China's 2013-14 corn production to 213 million tonnes, from 205 million previously, citing an increase in expected plantings.
Bird flu fears
Soybeans fell on technical selling and concerns about feed demand in China, the world's top soy buyer.
Chinese state media on Wednesday announced two more cases of a new strain of bird flu, including one death, bringing to nine the number of confirmed human infections from the previously unknown flu type.
Most-active September soymeal futures on China's Dalian exchange fell two per cent amid worries that the flu could lower demand for poultry feed.
"There is a lot of uncertainty with this avian flu, this new strain in China, (and) fears that, due to poor livestock margins in China, they might not use as many soybeans as the USDA is stating," Gerlach said.
Soybeans have also gained relative to corn since last week's USDA stocks report, a factor that prompted some traders to take profits by exiting long soy/short corn spreads.
-- Julie Ingwersen
reports on the Chicago markets for Reuters. Additional reporting for Reuters by Michael Hogan in Hamburg and Naveen Thukral in Singapore.
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