Wheat Set for Biggest Monthly Rally in Two Years on Crop Concern

(Bloomberg) -- Wheat headed for its biggest monthly advance in two years in Chicago amid mounting concerns about supplies in North America.

Benchmark futures rose as much as 3.2 percent to a one-year high on the Chicago Board of Trade, while the spring variety traded in Minneapolis traded near the highest since mid-2014. Prices have surged as a drought hit U.S. crops and Canada cut its outlook for plantings.

Wheat Set for Biggest Monthly Rally in Two Years on Crop Concern

Drought conditions have spread across U.S. growing areas and almost all of North Dakota, the nation’s top spring-wheat producer, fell into abnormally dry conditions, data form the U.S. Drought Monitor showed Thursday. The same day, Canada cut its outlook for the total wheat area more than analysts expected and said canola plantings will top the grain for the first time ever.

“Concerns about crop outages and quality shortfalls as a result of the ongoing dry spell in the U.S. growing areas are getting bigger every day,” Commerzbank AG said in a note. “The shortage of high-quality spring wheat looks set to increase, as there is also a risk in Canada of a smaller crop than previously expected.”

September futures for soft red winter wheat rose 2.7 percent to $5.0975 a bushel by 5:46 a.m. in Chicago, taking this month’s rally to 19 percent. In Minneapolis, spring wheat gained 2.2 percent and has jumped more than 30 percent in June.

Analysts expect that U.S. farmers also planted less spring wheat than the U.S. Department of Agriculture anticipated in its March outlook. The USDA will update its planting estimates Friday.

In Paris, milling wheat for December added 1.1 percent to 180.50 euros ($206) a ton. The contract is up 5.4 percent this month as hot and dry weather curbed yield potential in western Europe, helping worsen crop conditions in France, the European Union’s top producer.

In other agricultural commodities:

  • September corn rose 1 percent to $3.7325 a bushel in Chicago.
  • November soybeans added 0.3 percent to $9.275 a bushel.
  • December soybean meal gained 0.5% at $301.30 per 2,000 pounds.