U.S. wheat rallies on export demand, weak dollar
* Corn futures in reach of $5 per bushel
* Dry weather in Brazil slowing soy exports
U.S. wheat futures rose nearly 1 percent in Asian trading on Thursday due to a weak dollar and as export demand
rose with Ukraine forecasting a bleaker grain harvest and export outlook than what was expected.
Chicago Board of Trade (CBOT) wheat for December delivery climbed 0.69 percent to $7.31-¾ per bushel by
0327 GMT, approaching a six week high ahead of weekly U.S. grains and oilseeds export data due later on
Thursday. The contract touched $7.37-¾ earlier, 1.5 percent above Wednesday's close.
"The rally we've seen today could be put down to continuing weakness in the U.S. dollar," Adam Davis, a senior
commodity analyst at funds manager Merricks Capital.
"The longer term theme is that the U.S. export data for wheat is going to be supportive with the market continuing to
look for exports to be strong."
The December contract is on track to revisit six-week highs with technical charts pointing to a resistance at $7.55
per bushel, a level not seen since early August when Russia banned grain exports after crops were devastated by
severe drought.
Dryness persists in parts of the Black Sea region, leading to concerns that lack of soil moisture will impact new
crops that will be planted before winter sets in.
Ukraine's farm ministry on Wednesday cut both its grain harvest and export outlooks for 2010/2011, revealing a
more significant impact than previously expected from winter frosts and a scorching summer.
"They would certainly need some more moisture, but I guess there are a few more weeks to go before we start to
get really concerned," said Davis.
Corn futures failed to breach the $5 per bushel level as profit-taking continued to keep a lid on prices after fivestraight
sessions of rises that took prices to near two-year highs.
December corn eased 0.25 percent to $4.94 per bushel, snapping five days of gains.
Prices had been supported by early yields in the U.S. cornbelt being below expectations, leading to views that the
U.S. Department of Agriculture might have to trim its forecasts for the 2010/11 U.S. crop.
Funds increasing net long positions have also provided support together with a tight global stocks-to-usage ratio.
"There are a lot supportive factors for corn but one of the risks is the net long fund positions are at record highs and
if there is a correction it could be reasonably ugly," said Davis.
Soybean futures were steady, garnering some support from concerns about dryness in Brazil, the world's No. 2 soy
producer, which is causing a slow down in exports.
Prolonged dry weather has left key waterways in the Amazon too shallow for barges to reach export terminals.
Soybeans for November delivery were unchanged at $10.42-1/5 per bushel with the next resistance level being
$10.50.
Davis said dry weather in Brazil could affect the planting of the new season crop.
"Everyone is watching Brazil but right now it is too early to get to excited although it is certainly a factor to watch,"
he said.