U.S. wheat futures jumped two per cent on Tuesday, hitting the highest price in three weeks as fears mounted that a return to dry weather in the drought-stricken southern Plains would damage the dormant crop.
Corn futures rose for the seventh straight session, the longest rally since June, as conditions turned dry in Argentina, while the U.S. Agriculture Department's forecast last week for tight stockpiles continued to underpin prices.
Benchmark wheat futures for March delivery rose for the third consecutive session, gaining 15-3/4 cents to $7.82-3/4 per bushel at the Chicago Board of Trade.
"The weather forecasts ubiquitously show a return to dry forecasts for the HRW (hard red winter wheat) areas for at least the next 10 days, holding wheat prices, and offsetting some of the moisture we got in December," ABN Amro analyst Charlie Sernatinger said in a note to clients.
CBOT March corn rose roughly one per cent, or 6-1/2 cents, to $7.30-1/2 per bushel, touching the highest level since Dec. 17. Corn notched the longest streak of higher prices since futures rose for nine straight sessions in June, in the first days of the deepest U.S. drought in five decades.
The bigger gains in wheat were spurred in part by the dip in the closely watched spread between wheat and corn prices to a six-month low. Wheat's premium to corn fell to 44-1/2 cents per bushel on Monday before rebounding to 53-1/2 cents.
"Under 50 seemed awfully cheap," said Ken Smithmier, analyst at The Hightower Report in Chicago. "(I was) hearing some folks on Wall Street may have been touting the wheat-corn spread this morning, which also might be bringing in some new money."
There was little rain or snow in the forecast in the Plains and western Midwest regions that grow most of the wheat in the United States, said Joel Widenor, an agricultural meteorologist for Commodity Weather Group.
"Dry weather will prevail in core drought areas of the western Midwest and Central Plains through the last half of January," Widenor said.
A cold snap this week may have caused some minor winterkill in areas of western Nebraska, and a blast of cold Arctic air is expected next week centered on the Midwest, added Don Keeney, a meteorologist for MDA EarthSat Weather.
Conditions are expected to remain dry for the next two weeks in Argentina and southern Brazil, Keeney said.
Soybean futures traded in both positive and negative territory, with CBOT March soy ending 4-1/2 cents lower at $14.13-1/2.
Crop scout Michael Cordonnier lifted his outlook for Brazil soy production on Tuesday by one million tonnes but slashed his estimate for Argentina soy production by the same amount. His overall South American soy production estimate was unchanged at 147.2 million tonnes.
The widely followed private agronomist also held his South American corn crop estimate steady at 95.6 million tonnes, down one million from last year.
"What's helping us is the drier profile in southern Brazil and Argentina. About a third of Argentina's crop could move into a concern," said Don Roose, president of the brokerage U.S. Commodities in West Des Moines, Iowa.
-- Michael Hirtzer reports on the grain and livestock commodity markets for Reuters from Chicago. Additional reporting for Reuters by Sam Nelson in Chicago.