July 27, 2012 / 4:46 PM / 5 years ago

GRAINS-U.S. soy, corn, wheat race higher as rally resumes

* Corn rallies on declining yield expectations
    * Soybeans rise as chances for rain decline
    * Ag commodities post first weekly drop in five weeks
    * Bargain buying, short-covering, weak dollar also
supportive

 (Adds new analyst quote, updates with closing prices)
    By Mark Weinraub
    CHICAGO, July 27 (Reuters) - U.S. soybeans, corn and wheat
rose o n F riday as chances for weekend rain in the
drought-stricken Midwest lessened, showing that investors were
not willing to give up on the recent rally that pushed prices to
record highs despite choppy trade this week.
    Friday's gains, led by soybeans' 2.2 percent jump on the
Chicago Board of Trade, were not enough to reverse this week's
selloff, the first weekly decline in five weeks. CBOT corn rose
2 percent on Friday and wheat was up 1.6 percent.
    "We are back on dry, hot weather for the United States and
disappointing rains for the corn and bean belt," said Mike
Zuzolo, president of Global Commodity Analytics & Consulting in
Lafayette, Indiana. "We are back to the typical model we have
had here the last few weeks where at the end of the week (the
market) goes higher in anticipation of more crop condition
declines on Monday."
    The latest forecast scaled back expectations for rain during
the next five days, particularly in Illinois, the second-biggest
soybean production state, according to Commodity Weather Group's
outlook released Friday morning. Scattered showers were expected
in parts of Iowa, South Dakota, southern Minnesota and Illinois,
with rainfall totals amounting to half an inch to an inch.
    The forecast was critical for soybean development as final
yield potential will be determined in the next week around much
of the U.S. Midwest. An early planting advanced soybean maturity
ahead of the typical schedule.        
    "As far as the bean crop is concerned, it (rain) would help
them but I think the trade wants to see a little more
convincing," said Dewey Strickler,  president of AgWatch Market
Advisors.  "They want to see more proof that we got conditions
stabilized."
    Crop forecasters Lanworth, a unit of Thomson Reuters
, and Informa slashed their yield estimates for both corn
and soybeans on Friday, illustrating the effects of the worst
drought to hit the region since 1956. 
 
    "(That) should not come as surprise but is just more added
confirmation that we are looking at a smaller crop," said Paul
Beere, analyst with Prime Agricultural Consultants.  
    A round of bargain buying and short-covering also was
lending support to agricultural commodities as investors were
protecting themselves against a sharp rally on Monday morning if
the rains disappoint.
    "(There is) a little bit of risk premium starting to flow
back in," said Karl Setzer of MaxYield Cooperative in West Bend,
Iowa. "We are still in a weather market. There are still
(only)limited chances for precipitation."
    CBOT new-crop November soybeans ended 34-1/4 cents
higher at $16.01-3/4 a bushel. The December corn contract 
rose 17 cents to $7.93-1/4 a bushel, and CBOT September soft red
winter wheat rose 14 cents to $8.98 a bushel.
    Front-month corn lost 3.2 percent this week after
gaining 42 percent in the past five weeks. Wheat was down
4.8 percent after rising 55 percent since mid-June, and soybeans
 were down 4.4 percent after climbing 28 percent in the
past five weeks.
    A falling dollar and surging equities market signaled a
"risk-on" trading day, providing further support to investors
who had bullish attitudes toward commodities.
    As scattered rain this week in the north and east of the
U.S. farm belt brought the first significant relief from the
drought, agronomists said even a small amount of moisture would 
help the soybean crop avoid the fate of corn which has been
decimated by the unrelenting heat. 
    Corn yield potential was highly variable in west-central
Iowa, scouts on a crop tour said on Friday. 
    Spring wheat potential in the northern U.S. Plains was 8.2
percent higher than 2011 as an early planting protected the crop
from harm when temperatures surged during the summer.
    The 2012 U.S. hard red spring wheat crop was projected to
yield 44.9 bushels per acre, up from 41.5 bpa in 2011 and up 7.7
percent from the tour's five-year average of 41.7 bpa, scouts on
an annual crop tour said on Thursday. 
 Prices at 2:24 p.m. CDT (1924 GMT)      
                              LAST      NET    PCT     YTD
                                        CHG    CHG     CHG
 CBOT corn                  798.50    17.25   2.2%   23.5%
 CBOT soy                  1684.25    28.50   1.7%   40.5%
 CBOT meal                  527.70     8.90   1.7%   70.6%
 CBOT soyoil                 52.04     0.36   0.7%   -0.1%
 CBOT wheat                 898.00    14.00   1.6%   37.6%
 CBOT rice                 1560.00    22.00   1.4%    6.8%
 EU wheat                   257.75     1.75   0.7%   27.3%
 
 US crude                    90.10     0.71   0.8%   -8.8%
 Dow Jones                  13,094      206   1.6%    7.2%
 Gold                      1622.60     7.21   0.4%    3.8%
 Euro/dollar                1.2312   0.0031   0.3%   -4.9%
 Dollar Index              82.6910  -0.1160  -0.1%    3.1%
 Baltic Freight                933      -25  -2.6%  -46.3%
 
In U.S. cents, benchmark contracts, except EU wheat (euros) and
soymeal (dollars). CBOT wheat, corn and soybeans per bushel,
rice per hundredweight, soymeal per ton and soyoil per lb. 

 (Reporting by Mark Weinraub; editing by John Wallace,
Marguerita Choy and Jim Marshall)

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