U.S. grains: Wheat surges after USDA cuts Russian output estimate

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Chicago | Reuters — U.S. wheat futures surged nearly four per cent for the biggest gains in about a month on Tuesday after the U.S. Department of Agriculture slashed its estimate for production in top exporter Russia.

Corn futures jumped over two per cent while soybeans notched more modest gains in the wake of the monthly USDA supply and demand report at midday. The agency also lowered its forecasts for U.S. corn and soy ending stocks for the 2018-19 crop year that begins on Sept. 1.

Prices for all three commodities recovered from steep declines, with soybeans rebounding from a 10-month low.

“We went into this report with a lot of liquidation going on, technically oversold; you were kicking the dog. Now you’ve got a report that is a little bit friendly, a relief rally and also weather on the backdrop,” said U.S. Commodities analyst Don Roose.

“What it means is, we’re adding risk premium to the market in case we get weather problems in the next couple weeks,” Roose said, adding hot weather could hurt corn and soy crops during the U.S. growing season.

USDA late on Monday reduced good-to-excellent crop condition ratings for the corn and soy crops by one percentage point, but the ratings still are some of the best in years while weekend rainfall in the Midwest also benefited crops.

Chicago Board of Trade July corn settled up 10-1/4 cents at $3.77-1/2 per bushel and CBOT July soybeans were up 1/4 cent to $9.54 (all figures US$). Soyoil futures fell sharply, pressured by USDA’s outlook for a bigger U.S. soy crush that would result in increased supplies of the vegetable oil.

CBOT July wheat gained 20 cents to $5.34-1/2 per bushel, for the biggest daily percentage increase since May 18.

Investment funds bought large amounts of wheat and corn futures and bought and sold roughly equal amounts of soybeans, traders said.

USDA raised its estimate of all U.S. wheat production for 2018-19 by six million bushels, to 1.827 billion, but it cut its Russia wheat harvest estimate to 68.5 million tonnes, from 72 million.

“I don’t think anyone was looking for a 3.5 million-tonne drop in Russia. I would buy wheat on that, too,” said Price Futures Group analyst Jack Scoville.

Grains prices had firmed prior to the report’s release, gaining in part as the U.S.-North Korea summit in Singapore stoked expectations of easing trade tensions between the United States and China, potentially boosting exports.

— Michael Hirtzer reports on commodity markets for Reuters from Chicago; additional reporting by Tom Polansek in Chicago, Mark Weinraub in Washington, Michael Hogan in Hamburg and Naveen Thukral in Singapore.

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