Grain futures edge higher, soybeans hit 6-week high on dry weather

Grain futures advanced on Tuesday as weather forecasting agencies predicted that the warm and dry weather across the main U.S. corn and soybean growing areas will extend into this week. Market players eyed the upcoming weekly USDA crop progress report due later today.

On the Chicago Board of Trade, soybeans for delivery in November rose to $14.0313 per bushel at 11:11 GMT, up 3.35% on the day. Prices held in a wide range between a 6-week high of $14.0463 per bushel and low at $13.7900. Meanwhile, corn futures for delivery in the same month surged 1.71% to $4.9063 a bushel by 11:12 GMT. Prices ranged between a 1-week high of $4.9338 and low at $4.8363 per bushel.

Both soybean and corn crops rebounded after settling lower last week as weather forecasters continued to predict unfavorable drought and high temperatures that could hurt yields. QT Weather reported yesterday that the area of the Corn Belt that has received below-normal rainfall has now expanded to 70% of the region and more drought should be expected this week. DTN said on August 30 that dry and warm weather in the Midwest, particularly in Iowa, Illinois and Missouri, will continue to stress crop developing.

On August 12, the USDA reduced its U.S. corn output forecast to 13.763 billion bushels, 1.3% below its July estimate at 13.950 billion. Stockpiles are also poised to drop and will equal 1.837 billion bushels, 6% below July’s 1.959 billion projections. Soybeans production forecast was revised downward to 3.255 billion bushels, 5% below July’s 3.42 billion estimate, but still 8% higher than a year earlier. Yields expectations were also reduced and now stood at 42.6 bushels per acre, below the previous reading of 44.5 bushels and analysts’ projections for a 43.6 output per acre.

According to the Professional Farmers of America, which made a four-day tour of fields in seven Midwest states in the second half of August, soybean output may fall by 3% below USDA’s projections. Soybeans jumped 15% in August as deteriorating weather conditions threatened yields. Meanwhile, corn production might contract by 2.2% below the government agency’s 13.763 billion bushels forecast but it is still expected to be record high.

Paris-based farm adviser Agritel wrote: “Market news is dominated by weather conditions in the Corn Belt, with a continuation of the water deficit, especially damaging for soybean crops in the critical stage of pod formation.”

Elsewhere on the CBOT, wheat futures for December delivery traded at $6.5888 per bushel at 11:11 GMT, marking a 0.7% daily advance. Prices held in a range between days high and low of $6.6363 and $6.5300 per bushel respectively. The grain gained slightly on Friday and settled the week 3.3% higher after adding 0.3% in the preceding week.

The USDA reported last Monday that the spring wheat condition remained fairly the same from a week earlier with 67% of the crop rated as good-excellent as of August 25 and 26% categorized as “Fair”, compared to 66% and 27% respectively a week earlier.

The government agency also said that harvesting fell behind last year’s pace but the winter-wheat crop was completely collected. As of last week, 42% of the spring wheat crop was harvested, which marked a 26% advance from the previous period. This however well behind the five-year average of 54% and 2012′s 87% spring wheat harvested during the comparable week.

“For wheat the market is a bit more calm, the drought in the U.S. doesn’t affect this crop, which is already harvested,” Agritel wrote.