November 27, 2012 / 4:06 PM / in 5 years

GRAINS-Wheat posts biggest gain since September on crop rating

* Parched US winter wheat rating a new November low
    * Soybeans propped up by south Brazil weather concerns
    * Grain complex supported by agreement over Greece bailout

 (Updates U.S. market activity to close, wheat extending gains,
adds analyst quotes)
    By Michael Hirtzer
    CHICAGO, Nov 27 (Reuters) - U.S. grains staged a sharp rally
on Tuesday amid a fresh inflow of investment money near month's
end, with wheat posting its biggest daily gain since September
on a sharply reduced assessment of the fledgling Plains wheat
    Record-low wheat condition ratings due to very dry soils
underlined supply fears following a string of weather-reduced
harvests around the world.
    Corn and soybean futures notched their largest gains in at
least a month. Traders said investment funds bought the most
contracts in those markets since Oct. 18. 
    "You had a market that was a little asleep and we had some
fresh buying coming on," said Sterling Smith, market strategist
at Citigroup in Chicago. "You have enough concerns to get a
weather story going even though (troubled growing conditions
are) not centered in one place."
    Wheat and corn futures changed hands at the highest prices
in about two weeks while soybeans hit their highest point so far
this month as traders covered short positions, bracing for more
gains on fears that crop yields in the United States, South
America and Australia may miss expectations.
    Wheat gained for a sixth straight session, its longest rally
in four months, while soybeans rose for a third consecutive
    The markets were also buoyed by news that euro zone
countries and the International Monetary Fund clinched an
agreement on reducing Greece's debt in a breakthrough to release
urgently needed loans. 
    Benchmark hard red winter wheat futures rose the most at 3.5
percent. Kansas City Board of Trade HRW wheat posted its
largest premium since Nov. 6 over the more widely traded Chicago
Board of Trade wheat contract.
    "Because of the drought conditions in the hard red winter
wheat producing states here in the U.S., we finally decided
yesterday to buy KC hard red winter wheat and to sell Chicago
'soft' red," analyst Dennis Gartman said in a note to clients.
    "KC 'hard' wheat is relatively cheap compared to Chicago in
the old crop futures and that should work to our advantage,"
Gartman said.
    KCBT December wheat rose 31-1/2 cents to $9.15-1/4
per bushel while CBOT December wheat climbed 24 cents to
    In a weekly crop progress report on Monday - its final one
for the year - the U.S. Department of Agriculture said the
condition of the winter wheat crop fell to an all-time low for
late November, continuing a series of lows struck this month
amid persistently dry weather.
    It said the share of the U.S. winter wheat crop rated good
to excellent fell to 33 percent due to dry conditions in the
Plains, as the plants headed into winter dormancy.
    KCBT wheat for July delivery, the first contract to
reflect harvest of the emerging crop, hit a premium of 55-3/4
cents per bushel above new-crop Chicago July wheat, a
record wide spread for those contracts.
    While matching analyst estimates, the poor U.S. crop ratings
added to concerns about dwindling global stocks, already
stretched following weather-disrupted seasons in the Black Sea
region and expectations that adverse weather will cut yields and
quality in harvests in Argentina and Australia.
    Ken Smithmier, grains analyst at the Hightower Report in
Chicago, said the spread could widen to $1 per bushel after
rains in Australia damaged the country's high-protein milling
wheat. Asian buyers may now be forced to buy HRW wheat from the
United States, he said.
    "We've been recommending that (trade) since the spread was
at 37 to 40 cents and we definitely feel like it can go to a
buck or more. It will probably take some time into 2013," he
    December corn rose 12-3/4 cents to $7.60 a bushel,
extending gains from Monday when the corn market breached
technical resistance with background support from rain delays to
planting in Argentina. Corn earlier lagged the rising wheat and
soybean markets.
    "But (corn) did follow along and we did see some funds
coming in and willing to buy it," Citigroup's Smith said.
    January soybeans gained 1.7 percent, or 24-1/2 cents,
to $14.49-1/4 a bushel. Soyoil futures rose a sixth
straight session in the longest rally since August, boosted by a
rash of U.S. export sales of the vegoil. 
    The soybean market has been lifted this week by concerns
over dry growing conditions in southern Brazil, which have
raised some doubts about the extent to which upcoming South
American crops can replenish tight global stocks.
    Soybean prices are too low and do not reflect the possible
risk to tight global supplies if the critical South American
soybean harvest in early 2013 suffers weather damage,
Hamburg-based oilseeds analysts Oil World said on Tuesday.

 Prices at 3:34 p.m. CST (2134 GMT)      
                              LAST      NET    PCT     YTD
                                        CHG    CHG     CHG
 CBOT corn                  760.00    12.75   1.7%   17.6%
 CBOT soy                  1449.25    24.50   1.7%   20.9%
 CBOT meal                  439.30     7.60   1.8%   42.0%
 CBOT soyoil                 50.12     0.85   1.7%   -3.8%
 CBOT wheat                 873.00    24.00   2.8%   33.7%
 CBOT rice                 1508.50    16.50   1.1%    3.3%
 EU wheat                   273.50     3.75   1.4%   35.1%
 US crude                    87.36    -0.38  -0.4%  -11.6%
 Dow Jones                  12,878      -89  -0.7%    5.4%
 Gold                      1742.05    -6.44  -0.4%   11.4%
 Euro/dollar                1.2938  -0.0034  -0.3%   -0.1%
 Dollar Index              80.3700   0.1210   0.2%    0.2%
 Baltic Freight               1097        3   0.3%  -36.9%
 (Additional reporting by Gus Trompiz in Paris and Colin Packham
in Sydney; Editing by Dale Hudson, Marguerita Choy and Jim
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