U.S. wheat futures rose for the fourth day in a row Thursday, rallying above US$9 a bushel to a near six-week high, as traders staked out positions ahead of a government report expected to show tightening global supplies.
Soybean futures fell, pressured by declining export demand, and pulled corn prices lower, traders said.
The market's focus remained on wheat as expectations of smaller crops in places like Argentina and Australia, coupled with dry conditions in key growing areas of the U.S. Plains, provided support to a commodity that has been stuck in a narrow trading range for months.
Wheat bulls were hopeful that problems with the crop overseas could boost demand for U.S. supplies on the export market.
"People should be buying it," said Jerry Gidel, analyst for Rice Dairy. "It is a bargain here. The world's normal exporters... do not have a lot of excess supplies."
December soft red winter wheat futures at the Chicago Board of Trade ended up 8-1/2 cents at $9.02-1/2 a bushel. Prices peaked at $9.05, their highest level since Sept. 28 (all figures US$).
CBOT wheat has risen 4.3 per cent this week, its biggest four-day rally since August.
January soybean futures were 11-1/4 cents lower at $14.95-3/4 a bushel, the benchmark contract's first close below $15 since Oct. 16. CBOT December corn dropped three cents to $7.41-1/4 a bushel.
The U.S. Agriculture Department said early on Thursday that weekly export sales of soybeans were at their lowest point in 16 months. Net soybean export sales of 191,900 tonnes were well below forecasts for 600,000 to 800,000 tonnes and included a cancellation of 545,600 tonnes from an unknown country.
"Cancellations in export sales in soybeans certainly will not go unnoticed," said Greg Wagner, president of GWX-Ag Advisors. "It begs the questions as to whether or not the market's poor price performance ... might in fact partly reflect a nervousness regarding future cancellations."
A firm dollar, which makes investors less likely to stock their portfolios with risky assets such as grains and reduces the need to buy commodities as a hedge against inflation, added further pressure on corn and soybeans.
Analysts expect the USDA will boost its forecast for U.S. corn and soybean yields in its monthly supply and demand report. Field reports from harvest indicate the damage from the worst drought to hit the Midwest in more than 50 years was not as bad as initially feared.
USDA also was seen cutting its global wheat stocks forecast for the second month in a row due to weather-related problems in key growing areas such as Ukraine, Australia and Argentina.
"At some point, this winter wheat business is going to shift back to the U.S. That time is getting pretty close," a wheat trader on the CBOT floor said.
Australia, the world's second-largest wheat exporter, is expecting a much smaller crop this year, with early harvest showing lower protein scales and poor yields. Traders said rains forecast over the nation's east coast could slow the harvest.
Australia's wheat exports may shrink to 16.85 million tonnes, the lowest in three years, according to a survey of analysts in a Reuters poll.
Asia's top buyers, who rely on Australia for the bulk of their milling wheat supplies, may be forced to import larger volumes of high-protein spring wheat from the U.S. and Canada.
-- Mark Weinraub covers the grain futures markets for Reuters in Chicago. Additional reporting for Reuters by Sam Nelson in Chicago, Naveen Thukral in Singapore, Gus Trompiz in Paris and Nigel Hunt in London.