Spring wheat futures rose to a two-and-a-half year high on Tuesday as drought-like weather continued to take a toll on the U.S. crop.
The U.S. Department of Agriculture said late Monday that 41% of the spring wheat crop was in good or excellent condition, down from 45% last week and the lowest on record, according to research firm AgResource.
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That surprised analysts who had expected conditions to improve, and prompted traders to bet on Tuesday that much of the crop may be beyond repair. Analysts say that could prompt a shortage of the protein-rich wheat variety.
Spring wheat futures for July delivery rallied 2.6% to $6.56 1/4 a bushel at the Minneapolis Grain Exchange, the highest close since Dec. 18, 2014. The strength in spring wheat prices also helped carry prices for other varieties of the grain.
Weather forecasters don't see much relief for northern Plains-based spring wheat, with the dry and hot weather that has ravished some of it expected to continue. The crop may struggle to exceed its yield trend, said Commodity Weather Group.
A selloff in crude oil dragged other grain-and-oilseed contracts lower. Traders bet rising crude production in countries like the U.S. would undercut efforts to contain a glut, pushing July-dated futures down 2.2% to $43.23 a barrel on Tuesday.
That pressured the commodity sector generally, as well as agricultural products like soybeans which compete as a fuel source. Growing conditions for crops like corn and soybeans are also mixed, however.
"This is the heart and soul of why we're breaking here, and why the grains are finding this kind of pressure even though crop conditions aren't improving," said Mike Zuzolo, president of Global Commodity Analytics & Consulting in Atchison, Kansas.
July soybean futures fell 1.1% to $9.27 3/4 a bushel at the Chicago Board of Trade, while July corn slid 1.4% to $3.70 a bushel.
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(END) Dow Jones Newswires
June 20, 2017 15:45 ET (19:45 GMT)