(NASDAQ) – Wheat futures closed at their highest level in eight days following deeper concern over the health of European crops. Corn and soybean contracts also climbed.
Positive signals from foreign-based buyers and speculation that asset managers could curtail bets on lower grain prices also helped lift Chicago-listed wheat contracts, though traders were mixed on the rally’s potential longevity.
Fueling the wheat rally was a report from France’sFarm Ag Ministry that reduced estimates for the country’s soft wheat crop by about one-fifth, confirming troubles that many traders had suspected in one of Europe’s key wheat-growing nations. That would mark a 30-year low for French wheat yields, analysts said, and similar difficulties are anticipated to cut into wheat crops in other European breadbaskets.
“France is a known, and now the unknowns are Germany and Poland,” said Mike O’Dea, risk management consultant with INTL FCStone.
Friday’s strong, sustained rally in the beleaguered wheat market also called into question whether asset managers like hedge funds and commodity trading advisers were scaling back longer-standing bets on lower grain prices. Closing out such trades typically involves buying contracts, which would press prices higher.
“The funds are heavy shorts in there,” said Larry Glenn, a broker and analyst for Frontier Ag, a commodities brokerage firm. “You’d think they would start to cover and get a little nervous.”
Despite quantity and quality problems for European wheat harvests, analysts generally saw little change to massive global supplies of wheat, which have been the chief factor pressuring prices this year.
One uncertainty was removed for U.S. wheat exporters Friday, after authorities in South Korea lifted a temporary suspension on new purchases of U.S.-grown wheat varities–a move that followed the U.S. Department of Agriculture’s announcement last week that it had found an unauthorized strain of genetically engineered wheat growing in Washington state. South Korea and Japan had curtailed some new wheat purchases in response to the discovery.
Soybean futures expiring in September settled 1.5% higher Friday, rising 14 1/2 cents to $9.88 a bushel, the highest closing price in a week. The contracts were lifted by a big jump in sales to foreign-based buyers, including larger sales to China, Germany and the Netherlands.
Soybean futures held their gains despite crop yield estimates from Informa Economics Friday that pegged soybean yields averaging 47.7 bushels an acre for the U.S., ahead of the USDA’s estimated 46.7 bushels.
Informa’s estimate of U.S. corn yields hitting 169.8 bushels an acre, ahead of the USDA’s 168 estimate, briefly slowed gains in September-listed corn futures. But those contracts settled higher by 1.1%, or 3 1/2 cents, at $3.24 1/4 a bushel, as asset managers were seen trimming short positions in the market.
The USDA is set to update its crop projections next Friday
