Grains rise on drought and heat

POOR CROPS

Spring wheat headed for its longest rally in almost three years and corn rose to the highest in more than two weeks as heat scorches North American fields.

U.S. Department of Agriculture data on Monday showed a further collapse in spring-wheat ratings, which are now at their worst since 1988.

While the variety only accounts for a fraction of world grain output, the deterioration highlights weather worries across the globe that are driving a rebound in crop prices.

The gains may revive food-inflation concerns after surging crop prices earlier this year helped send global food costs to near a decade high.

Recent rain in parts of the U.S. farm belt failed to buoy corn ratings, and this week's hot and dry conditions in the upper Midwest are stoking fears over plant health.

At the same time, Brazil is seeing slow corn harvests due to weather-related planting delays.

The dryness comes as U.S. soybeans are set to hit their critical pollination phase in a few weeks.

“With little chance of showers between now and pollination, yield hopes for the soybean are likely to continue shrinking in the summer heat,” Jacqueline Holland, an analyst at Farm Futures, wrote in a note.

North American weather presents an especially grim outlook for farmers of spring wheat, which is used to make foods like pizza and bagels.

Little reprieve from arid conditions is expected for U.S. growing regions, and “significant dryness and stress” will persist for much of the Canadian prairies, according to forecaster Maxar.

Most-active futures for spring wheat rose an eighth day in Minneapolis, the longest rally since August 2018, with prices close to their highest since 2012.

In Chicago, soft red winter wheat touched a two-month high.

The price gains threaten to worsen inflation for food and animal feed. The United Nations' Food and Agriculture Organization's food price index, which tracks a basket of grains, vegetable oils, meat, dairy and sugar, rose to its highest level in a decade in May.

Wheat futures have also been spurred by Chinese demand, with the nation's interest in using the grain for feed “reverberating through the market,” said Tobin Gorey, a strategist at Commonwealth Bank of Australia.

Kazakhstan's plans to restrict some grain shipments provided further support, he added.

Soybeans, soy oil and soy meal all gained. On the ICE Futures U.S. exchange, canola rebounded.

The oilseed has surged more than 40 per cent this year as drought bakes growing regions in Canada, the world's biggest canola producer.