Wheat futures rallied Tuesday over deteriorating crop conditions, while corn prices rose to a multimonth high.
U.S. Department of Agriculture figures released Monday afternoon showed spring wheat rated good or excellent declining to 55% from 62% last week, as unseasonably hot, drought-like weather develops in major growing states such as North Dakota and South Dakota.
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"At this time of year that's just devastating," said Jim Gerlach, president of A/C Trading Co. in Fowler, Ind.
The quality declines helped extend a rally in hard-red spring wheat futures. Traders are betting spring wheat will see increased demand over winter wheat, mostly grown further south, this year because of its higher protein content. Analysts say the latest crop ratings could result in tighter supplies of this higher-protein variety despite a broader glut of other wheat types.
Spring wheat futures for July delivery rose 1.7% to $5.98 3/4 a bushel at the Minneapolis Grain Exchange, the highest close since July 10, 2015.
That buying followed through into winter wheat contracts, though USDA good-or-excellent ratings for those crops dropped by only 1 percentage point to 49% from 50% last week.
Chicago soft-red winter wheat futures rose 1.5% to $4.35 3/4 a bushel at the Chicago Board of Trade. Kansas City hard-red winter wheat contracts gained 1.9% to $4.38 a bushel.
Higher crude-oil prices and a lower dollar also encouraged optimistic bets in other grain and oilseed futures.
Corn futures closed at a three-and-a-half-month high, testing the upper end of a recent narrow trading band. Analysts said the large short positions held by managed funds in recent months leaves grain and soybean futures vulnerable to a sharp correction if weather issues spark a futures rally.
If corn breaks through its recent ceiling, said Mr. Gerlach, "you're going to have some of those shorts running to the hills."
CBOT July corn futures rose 1.1% to $3.77 1/4 a bushel, the highest close since Feb. 15. CBOT July soybean futures climbed 0.2% to $9.23 1/2 a bushel.
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(END) Dow Jones Newswires
June 06, 2017 16:09 ET (20:09 GMT)