Grain futures resume gains on unfavorable weather forecasts

Grain futures rebounded from yesterdays losses and advanced for a third day in four as outlook for hot and dry weather threatened to trim yields.

On the Chicago Board of Trade, corn futures for delivery in December traded at $4.9088 per bushel at 9:03 GMT, up 0.92% on the day. Prices ranged between days high and low of $4.9188 and $4.8588 a bushel respectively. The grain plunged 3% on Tuesday, the steepest fall since August 13, but trimmed its weekly decline to 0.7% following Wednesdays rebound.

Meanwhile, soybeans for November delivery traded at $13.8050 per bushel at 9:05 GMT, marking a 0.69% gain. Futures held in a days range between $13.8775 and $13.7339 per bushel respectively. The oilseed slipped 1.2% on Tuesday but Wednesdays climb extended its weekly advance to 1.3%.

Grain futures rebounded on Wednesday as weather forecasting models continued to point at unfavorable weather for crop developing. DTN said yesterday that most if the Midwest will keep experiencing hot and dry weather in the next five days, laying pressure on crops.

On August 12, the USDA reduced its U.S. corn output forecast to 13.763 billion bushels, 1.3% below its July estimate at 13.950 billion. Stockpiles are also poised to drop and will equal 1.837 billion bushels, 6% below July’s 1.959 billion projections. Soybeans production forecast was revised downward to 3.255 billion bushels, 5% below July’s 3.42 billion estimate, but still 8% higher than a year earlier. Yields expectations were also reduced and now stood at 42.6 bushels per acre, below the previous reading of 44.5 bushels and analysts’ projections for a 43.6 output per acre.

According to the Professional Farmers of America, which made a four-day tour of fields in seven Midwest states last week, soybean output may fall by 3% below USDA’s 3.255 billion bushels projections. Soybeans have fallen 1.8% this year amid ample supply outlook but prices jumped 15% in August as deteriorating weather conditions threatened yields. Meanwhile, corn production might contract by 2.2% below the government agency’s 13.763 billion bushels forecast but it is still expected to be record high.

Simon Clancy, director for brokering services at Ikon Commodities Pty Ltd. in Sydney, said for Bloomberg: “It’s all weather driven. Overnight weather news must be less favorable and that’s probably what’s kicked the market again.”

The USDA said in its weekly crop progress report on Monday that corn condition has deteriorated last week, despite remaining a lot better than last year. As of the week ending August 25, 59% of the crop was rated good-excellent, compared to 61% a week earlier and 22% in the comparable period in 2012.

As for the soybeans crop, the government agency again marked a worsening in its condition. As of last week, 58% of the crop was categorized as “Good” and “Excellent”, below the preceding week’s 62% but still well above last year’s 30%. The USDA also reported that the blooming stage was nearing an end with 96% of the plants having bloomed as of August 25, compared to the five-year average of 98% and 2012′s 99% during the comparable week.

Meanwhile, CME Group Inc. increased the margin requirements for corn and soybeans trading, which will become effective after the close of todays business day. The initial margin for corn will be increased by 17% to $2 363 for speculative traders and by 17% to $1 750 for hedgers and members. The initial margin for soybeans will gain to $4 725 from $4 050 for speculative traders and surge to $3 500 from $3 000 for members and hedgers.

Elsewhere on the market, wheat futures for December delivery rose to $6.6813 per bushel at 9:03 GMT, up 0.56% on the day. Prices held in range between days high and low of $6.6838 and $6.6325 a bushel respectively. The grain slipped 0.6% on Tuesday, which was offset by Wednesdays rebound that extended its weekly advance to 5.4%.

The USDA reported on Monday that the spring wheat condition remained fairly the same from a week earlier with 67% of the crop rated as good-excellent as of August 25 and 26% categorized as “Fair”, compared to 66% and 27% respectively a week earlier.

The government agency also said that harvesting fell behind last year’s pace. As of last week, 42% of the spring wheat crop was harvested, which marked a 26% advance from the previous period. This however well behind the five-year average of 54% and 2012′s 87% spring wheat harvested during the comparable week.