Spring wheat futures leaped to a two-year high on Tuesday as traders bet that a poorer crop would squeeze supply.
The U.S. Department of Agriculture reported late Monday that 45% of the spring wheat crop was in good or excellent condition, a decline of 10% for the week. Drought-like weather in the northern Plains last week stressed the crop in states like the Dakotas and Minnesota, pushing ratings to the lowest in years.
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The agency also said hot and dry weather in the Midwest took a toll on the newly planted corn and soybean crops, prompting traders to place optimistic bets on those futures.
"For all the weather that we've had, it's not surprising that [the ratings] dipped," said Karl Setzer, an analyst at MaxYield Cooperative in West Bend, Iowa. "But there's plenty of time for them ratings to improve."
Hard red spring wheat futures rose 4.6% to $6.28 a bushel at the Minneapolis Grain Exchange, the highest close since December 2014. Spring wheat, whose higher protein content makes the grain suitable for finer goods like pastries, are at a considerable premium to other classes of wheat as traders bet it will be in high demand this year. Soft red winter wheat futures at the Chicago Board of Trade rose 2.5% to $4.45 a bushel.
Showers in both the Plains and Midwest, however, are expected to aid the crops ahead of key yield-forming periods in the weeks and months to come. The Commodity Weather Group says as much as two inches of rain is forecast to layer the Midwest over the next 10 days.
Private forecaster Informa Economics released U.S. acreage estimates on Tuesday, showing an increase in corn planting by American farmers to 90.19 million acres from the USDA's March estimate of just under 90 million. Soybean planting is expected to fall to 89.36 million acres from the USDA's 89.48 million.
Some analysts had suggested that soybean acreage estimates might increase, as planting delays earlier in the season pushed more farmers away from corn. The USDA will release its updated numbers at the end of the month.
CBOT July soybean futures closed 0.1% higher at $9.32 1/2 a bushel, easing off highs earlier in the session. Corn rose 1% to $3.81 a bushel.
A weaker dollar and higher crude oil prices also supported the grain-and-oilseed sector.
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(END) Dow Jones Newswires
June 13, 2017 15:27 ET (19:27 GMT)