Wheat up for 2nd day on dry weather worries

October 18th, 2012

By:

Category: Grains, Oilseeds

(Reuters) – U.S. wheat rose for a second straight session on Thursday as dry weather in major exporters the United States and Australia renewed concerns over tightening global supplies.

Soybean futures extended gains, driven by bargain hunting after prices slid this week to their lowest since late June.

There was additional support for the agricultural markets with improved risk appetite following positive U.S. housing data and Chinese growth figures, which showed the world’s second biggest economy was stabilising.

“We have seen a general improvement in risk attitude,” said Luke Mathews, commodities strategist at the Commonwealth Bank of Australia.

“We still have the case in grain and oilseed markets that despite the seasonal harvest pressure, the forecast for inventories remains very tight.”

Chicago Board of Trade December wheat added 0.8 percent to $8.63 a bushel by 1119 GMT. November soy rose 1.1 percent to $15.26-1/2 while December corn gained 0.8 percent to $7.51-3/4.

In Europe, November milling wheat in Paris added 0.9 percent to 258.75 euros a tonne, as spillover support from the U.S. market offset the impact of strength in the euro, which traded close to a one-month high against the dollar.

AUSTRALIA WORRIES WHEAT MARKET

Rapid harvesting of U.S. corn and soybeans, together with improving yield prospects for soybeans after late rain, fuelled a wave of selling in the past month following record prices linked to the worst U.S. drought in more than 50 years.

But the effects of drought were still being felt in wheat-growing areas, with soil moisture reserves in the U.S. Great Plains hard red winter wheat region still reduced despite recent showers.

The dry area includes parts of Kansas, the largest U.S. producer of bread-making quality hard red winter wheat.

The wheat market was still marked by ongoing concern about harvest prospects in Australia after a dry growing season.

A Reuters poll of 10 analysts in early October showed Australia’s wheat production at 21.4 million tonnes, down more than one million tonnes from the government’s most recent estimate of 22.5 million.

“The situation in Western Australia is that crop conditions have been too dry for grain filling, so we are likely to see some downgrades in Western Australia wheat production,” said Mathews.

French grains consultancy Offre & Demande Agricole said it was now expecting the Australian crop at 19.5 million tonnes.

“On the wheat side, attention remains focused on Australia, which saw some rainfall in the southern part of New South Wales. This could limit yield losses but the rains need to last,” it said in a note.

In Europe, a poor wheat harvest in Britain was adding to supply tensions after drought-hit crops in the Black Sea region.

Britain is on track to become a net wheat importer in the 2012/13 season, for the first time in more than a decade, following a poor harvest this summer, with customs data showing imports far outstripped exports in August.

Analyst Strategie Grains, meanwhile, on Thursday cut its estimate of the UK wheat crop by 600,000 tonnes, pushing down its overall EU wheat harvest figure.

The analyst’s monthly supply-demand estimates also underlined tightening corn (maize) supply after drought in southeast Europe.

Its latest cut to the EU corn crop left output down 20 percent down on last year’s level.

In oilseeds, U.S. soybeans continued to recover from a 3-1/2 month low below $15 earlier this week that came after a slide from record highs of nearly $18 per bushel in early September.

Talk of export demand from China has encouraged buying, traders said.

Greater risk appetite among investors also helped grain markets in the wake of reassuring economic data.

China’s third-quarter gross domestic product grew 7.4 percent from a year earlier, the slowest pace since the first quarter of 2009 and marking the seventh straight quarter of slower growth, but matching expectations.

U.S. housing starts surged 15 percent in September, their fastest pace in more than four years, bolstering sentiment that had already perked up on a fall in the U.S. jobless rate and strong retail sales

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