Wheat up on short covering, soy softer

Thursday, 29 December 2011 01:11 - - {{hitsCtrl.values.hits}}

SINGAPORE/HAMBURG, (Reuters): U.S. wheat futures rose in European trade on Wednesday on end-of-year short covering while soybeans continued to be burdened by selling pressure after their sharp rally on Tuesday, traders said.

“There are a lot of shorts in the market which is supporting wheat today,” an analyst at one European bank said. “But you cannot read a lot into price movements in such thin markets as relatively small purchase orders can move prices, funds are squaring their portfolios as the end of the year approaches.”

Chicago Board of Trade wheat for March delivery rose 0.6 percent to $6.49 a bushel at 1220 GMT. Chicago March corn rose 0.6 percent on short covering interest to $6.37-1/4 a bushel following a rise of over 2 percent in the Tuesday session. European beanchmark wheat in Paris was also firm, with March up 1.1 percent at 192.75 euros a tonne. Chicago January soybeans fell 0.4 percent to $11.94 a bushel pressured by selling after climbing to a six-week peak in the last session, while a weaker crude oil market also burdened soy. “The farmers had kept the supply in the physical market very tight until they saw the rally,” said Jonathan Barratt, managing director at Commodity Broking Services in Sydney. “Now they are cashing in on the rally, that is the move which has motivated some selling.” High soy prices reduced consumer purchase interest, with Taiwanese buyers rejecting all offers in a tender on Wednesday for up to 60,000 tonnes of U.S. or Brazilian soybeans. Crude oil slipped on Wednesday after surging the day before on concerns about supply disruption after Iran’s threat to halt oil shipments through the Strait of Hormuz. Concern about dry weather in key South American corn and soybean producers continued to provide background support, traders said.

On Tuesday, soy and corn rose as dry weather in Brazil and Argentina took a toll on crops which were earlier forecast to be near record. No rain is in sight for thirsty soy-growing areas in southern Brazil and in Argentina, forecasters said, threatening crops already hit by long dry stretches.

December rainfall in Brazil’s southernmost state Rio Grande do Sul has been far below the average, which is bad for newly seeded crops, and the situation is growing critical in neighbouring Argentina, the top exporter of soy-derived products. Brazil and Argentina are the world’s No. 2 and No. 3 soy producers, respectively, after the United States. Argentina is also the world’s second-largest corn exporter. Widely followed crop scout Michael Cordonnier on Tuesday said he has cut his estimates for South American corn and soybean production for 2011/12 and indicated further reductions may be necessary. Cordonnier said he cut his outlook for Brazilian corn production to 60 million tonnes from his previous forecast of 63 million and reduced Argentine corn production to 27 million tonnes from his previous outlook for 28.0 million