Wheat prices up on Australia dry weather

Wheat prices rose the most in three weeks on speculation that dry weather will reduce wheat yields in Australia.

Growing regions need rain after hot, dry weather weakened crop prospects, said Luke Mathews, an agri-commodity strategist at Commonwealth Bank of Australia.

Farmers may harvest less-than-forecasted by the government when harvesting starts in November, analysts said.

No precipitation is expected in some areas for the next seven days, DTN Meteorlogix LLC said in a report.

Australia remains dry for the most part, said William Bayer, a partner at PTI Securities in Chicago, adding that Australia needs rain.

Wheat futures for December delivery rose 12 cents, or 2.5 percent, to US$4.9925 a bushel on the CBOT, the biggest gain for the contract since August 3. The grain fell 4.4 percent last week, partly on speculation that increasing global production will boost inventories.

Prices may also be supported by signs of increased demand. The USDA inspected 16.7 million bushels of wheat for delivery during the week that ended on August 20, up 17 percent from the prior week.

Egypt, the world's biggest importer of the grain, bought 120,000 tonnes from the US, the USDA said on August 19.

Bayer warned that the wheat market is somewhat oversold, and it is susceptible to some short-covering rallies.