U.S. wheat futures rallied for the third day in a row Wednesday, jumping 1.8 per cent to their highest level in more than five weeks as concerns about production shortfalls in exporters like Argentina and Australia boosted prospects for U.S. supplies on the global market, traders said.
Corn also was higher, pulled up by the wheat market, while soybean futures weakened, briefly breaking below US$15 a bushel for the first time in three weeks on expectations that the U.S. government will raise its estimate of the U.S. crop in its monthly report on Friday.
Wheat has risen 3.3 percent so far this week, shrugging off bearish outside market influences such as a firm dollar and weakening stock market to post its biggest three-day rally in more than six weeks.
"It is surprising and impressive with the deterioration in all the outside markets," said Ken Smithmier, an analyst with the Hightower Report. "People continue to anticipate better export business for us. There are a lot of major production cuts internationally that are going to be of great importance."
Chicago Board of Trade (CBOT) December wheat futures closed up 17 cents at $8.94 a bushel. Prices peaked at $8.97 a bushel, their highest level since Oct. 1, before running into resistance at the key $9 threshold (all figures US$).
Wheat gapped higher when Chicago trading pits opened, following a rally in Europe that pushed French futures to contract highs.
Speculative funds held a net short position on wheat futures, which left prices prone to rallies as the noncommercial traders covered those bearish bets. Wheat also was seen as a bargain due the relative weakness in the commodity compared to soybeans and corn in recent months.
"If you look around at the speculative crowd and the index funds, there really is no place for them to go other than the wheat," said Karl Setzer, a commodity trading adviser at MaxYield Co-operative in West Bend, Iowa. "Wheat is your buying opportunity."
European benchmark January wheat in Paris closed up 1.4 per cent at 275.25 euros a tonne, peaking at 277.50 during the session.
Traders were awaiting the upcoming U.S. Department of Agriculture report, which is expected to show further cuts to global wheat supplies for the 2012-13 crop year. Analysts were expecting the government's new global stocks view to fall to 170.969 million tonnes from 173, according to the average of estimates in a Reuters survey.
USDA cut its estimate of world wheat stocks, which were 198.17 million tonnes at the end of the 2011/12 crop year, by 3.71 million tonnes in its October report.
CBOT December corn ended up 3-1/4 cents at $7.44-1/4 a bushel. Gains in corn were limited by the firm dollar, which dampens enthusiasm for agricultural commodities, and expectations that the USDA's crop forecast will stabilize in the monthly supply and demand report on Friday.
CBOT January soybean futures were eight cents lower at $15.08-3/4 a bushel. CBOT soybeans, which hit an intraday low of $14.99, have fallen nearly 16 per cent from the record high of $17.94-3/4 hit in early September, when farmers feared that the drought had devastated their crop.
A sharp drop in the crude oil market weighed heavily on soybeans. Falling equity markets, which weakened as investors renewed their focus on a looming fiscal showdown in the U.S. Congress after the re-election of President Barack Obama added further pressure.
The government also is expected to again boost the size of this year's soybean crop as harvest results around the Midwest showed that damage from the worst drought in more than 50 years was not as bad as initially feared.
"The crop is going to be bigger when (USDA) comes out on Friday, and the weather is straightening up in South America," said Bill Gary, president of Commodity Information Systems in Oklahoma City. "There is just no impetus to keep pushing prices higher in beans right now."
Rainfall in Argentina this week will further slow fieldwork and early seedings of corn and soybeans in that country, said Drew Lerner, meteorologist for World Weather Inc.
"There will be rain Thursday through Saturday which will set them back a bit, but it looks drier for next week," he said.
Favourable crop weather continues in southern Brazil, with drier weather for the next 10 days boosting plantings, and northern Brazil continues to get needed rainfall.
-- Mark Weinraub reports for Reuters from Chicago. Additional reporting for Reuters by Sam Nelson and Julie Ingwersen.