Chicago Board of Trade (CBOT) soybean futures surged 3.5 per cent to a two-month high on Monday and corn rallied more than three per cent to a three-week high as dry weather threatened to trim U.S. crop yields.
Wheat rose a more modest one per cent on spillover buying from the corn and soybean markets, traders and analysts said.
"It's a weather market, there's not much rain across the Midwest. I expect to see corn conditions down two percentage points today and soybeans down one to two," said Sterling Smith, a futures specialist for Citigroup.
CBOT November soybeans closed up 44 cents at $13.03-1/4 per bushel, December corn was up 22 cents at $4.85-1/2, and September wheat was up 10-1/2 cents at $6.41-1/2 (all figures US$).
New-crop November soybeans opened above key chart resistance at its 200-day moving average of $12.70, a bullish technical signal. The key contract remained above that level when futures trading closed at 1:15 p.m. CT.
CBOT new-crop December corn has more than 60 per cent of total futures open interest of 1.2 million contracts, and the November soybean contract also accounts for 60 per cent of the total open interest of about 537,000 contracts, according to CBOT data.
The U.S. Department of Agriculture (USDA) is to release its weekly crop progress report at 3 p.m. CT Monday. A Reuters poll of analysts indicated good-to-excellent ratings for corn and soybeans would fall one percentage point, to 63 per cent.
Last week, USDA reported the U.S. corn conditions at 64 per cent good-to-excellent, and 32 per cent was filling kernels or in the dough stage of development. Also, 64 per cent of the soybean crop was rated good-to-excellent, and 58 per cent was setting pods.
Dry weather now could further lower condition ratings and interfere with the corn kernel filling process, and could cause severe harm to the vulnerable soybean crop since it is in its pod-setting stage of growth.
The turn to dry weather comes as analysts were penciling in bumper crops of U.S. corn and soybeans on big plantings of each and a mild summer following a late start due to a wet spring sowing season.
"I think after USDA's report everyone was expecting bigger crops in the next report, but now they're not so sure of that," a trader said.
USDA in its August crop report pegged 2013 corn and soybean production at lofty levels, but below the estimates of many analysts.
Traders and analysts have been expecting USDA to show larger crop prospects in its upcoming September crop report, but they note there is a lot of uncertainty due to the turn to dry weather.
Drier weather through the end of August likely will begin trimming U.S. corn and soybean yield prospects, an agricultural meteorologist said on Monday.
"Corn yields may be trimmed a little, and I would be surprised if we don't cut soybean yields," said John Dee, a meteorologist for Global Weather Monitoring.
Importers are hoping for record U.S. production to ease three years of tight grains and oilseed supplies.
"It's August, which is often a slow and choppy month. The crop tour is going on, so I expect to see tweets from there, moving the market," Smith said.
This week's annual Pro Farmer tour of Midwest crops is expected to find potential bumper crops of corn and soybeans but also crop maturity that is below normal.
Crop scouts early on Monday found excellent corn and soybean crop prospects in Ohio, which is the eastern border of the crop belt, and in South Dakota, in the far northwest corner of the major producing region.
-- Sam Nelson is a Reuters correspondent covering the CBOT grain and oilseed futures markets in Chicago.