July 28, 2011

US wheat futures lift on spring yield worries

US wheat futures finished higher with traders buying back previously-sold wheat positions, as concerns increase about spring wheat production in the northern Great Plains region.

Yields are expected to drop from last year, according to an annual spring-wheat tour that began Tuesday (Jul 26) in North Dakota, where the hard red spring wheat crop showed signs of lagging behind last year's yield.

A group of participants on the tour, sponsored by the Wheat Quality Council, estimated the average yield for five fields inspected in McLean and Sheridan counties at 42.6 bushels an acre. The same route last year had an estimated yield of 46.5 bushels an acre after a full day of inspections.

The spring wheat crop issues provided support to offset concerns about foreign demand, as the US faces increased competition for export business from Russia. The market also shrugged off pressure from a higher US dollar, which would make US supplies more expensive to foreign importers.

The strength of the market was surprising, as lower spring wheat yields were expected, said Shawn McCambridge, grains analyst with Jeffries/Bache in Chicago. The advances seem to be more a function of end of month positioning than a fundamental change in the market, he added.

Meanwhile, traders said the unwinding of short wheat/long corn spreads helped boost prices as well.

US corn futures end higher on spillover support from a rally in the wheat market. Wheat influences corn because both grains are used for livestock.

US soy futures stumbled Wednesday (Jul 27), with selling generated by an absence of a new weather threat for crops and jitters about the government's inability to come to a debt-ceiling agreement. Traders took a cautious approach awaiting clear signals on weather and decisions on the US debt ceiling, analysts said.