A drought in the Great Plains sparked a rally in wheat prices on Tuesday.
The U.S. Department of Agriculture said that the condition of the hard red winter wheat crop, primarily grown in southern Plains states like Kansas, dropped sharply as farmers in the region struggle through dry conditions.
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The agency said 14% of the Kansas crop was in good-or-excellent condition, and just 4% of the Oklahoma crop.
The ratings were "shockingly low," said Doug Bergman, director of agricultural trading at RCM Alternatives.
Dryness in the region is expected to intensify in February. The extent of the damage won't be clear until later in the season when the crop breaks dormancy, observers said.
Kansas City hard-red winter wheat futures led gains on Tuesday. March contracts rose 3.7% to $4.69 3/4 a bushel, just short of a six-month high.
Futures for Chicago soft-red winter wheat and Minneapolis spring wheat followed the Kansas City market higher.
Corn and soybean futures rose, helped higher by weather concerns of their own. Ongoing dryness in Argentina is increasingly likely to harm the country's crops, analysts said, while heavy rains in parts of Brazil are slowing the harvest and disrupting transportation.
March corn futures rose 0.8% to $3.61 1/2 a bushel at the Chicago Board of Trade, while March soybean contracts gained 0.9% to $10.00 1/4 a bushel.
Traders increasingly think that Argentina's soybean bounty for this year has fallen by at least 10% due to the difficult growing conditions, said Dave Marshall of First Choice Commodities. That had in part pushed some hedge funds, who have recently bet in large numbers that grain-and-oilseed prices were headed lower, to get out of their bearish positions.
"The fact that trading funds have been massively short is amplifying the recent rally more than mere crop losses would suggest," he said.
Analysts also pointed to recent signs of an uptick in demand for U.S. corn. The USDA said on Tuesday that private exporters sold 132,000 metric tons of corn to Spain for 2017-18, adding to sales from Monday.
That suggested to some that U.S. exporters could be catching up after lagging government projections.
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(END) Dow Jones Newswires
January 30, 2018 15:49 ET (20:49 GMT)