New-crop U.S. soybean futures soared their daily trading limit to an 11-month high on Monday, and corn reached a one-month peak above US$5 per bushel, as hot, dry weather threatened to cut crop yields in parts of the U.S. Midwest.
Wheat jumped to its highest level in three weeks, buoyed by the sharp gains in corn and soybeans and by worries that a cold snap will reduce Argentina's wheat harvest.
Forecasts for stressful weather in the U.S. farm belt ignited a rally because the corn and soy crops are less mature than normal for this time of year, putting them at greater risk of damage. Soybeans are seen as particularly vulnerable to dry weather as the crop is entering the critical pod-filling stage of development.
Key growing states such as Iowa and Illinois will be "completely dry this week and very warm," said Don Keeney, a meteorologist at MDA Weather Services. Not much relief is expected for the next 15 days, he said.
"The forecast has got everybody spooked," said Linn Group analyst Roy Huckabay.
Chicago Board of Trade November soybeans surged the daily, exchange-imposed limit of 70 cents during the session and closed up 61-1/2 cents at $13.89-1/2 a bushel. December corn jumped 30-1/2 cents to $5.00-1/2 a bushel.
Prices climbed after December corn earlier this month dropped to its lowest level in nearly three years on expectations for a bumper U.S. harvest. Soybeans earlier this month hit a one-year low.
"I think people got way ahead of themselves," Jerry Gidel, chief feed grains analyst for Rice Dairy, said about the recent selloff. "Like it or not, this market is going to be highly charged."
Grain buyers hope large harvests this autumn will replenish corn inventories that are expected to drop to a 17-year low by the end of the month. Soy inventories are projected at a nine-year low.
Supplies are tight due to strong demand and a poor harvest last year, when the United States suffered its worst drought in more than half a century. Hot, dry weather renewed worries that supplies could remain scarce.
"The drought is fresh in peoples' minds, and that is prompting some high amounts of fund participation," said Sterling Smith, futures specialist for Citigroup.
Commodity funds bought an estimated 30,000 corn contracts, 23,000 soybean contracts and 7,000 wheat contracts, traders said.
Dry for two weeks
The U.S. Department of Agriculture, in a weekly crop-progress report on Monday, rated 59 per cent of the country's corn crop as good to excellent, down two percentage points. Soybeans were rated 58 per cent good to excellent, down four percentage points from a week ago.
In Iowa, the top producer of both crops, "higher-than-average temperatures, coupled with the lack of significant precipitation, heightened concerns over soil moisture and crop conditions," USDA said.
Still, harvests are expected to be historically large.
Farm advisory Pro Farmer on Friday projected record U.S. 2013 corn production of 13.46 billion bushels, based on a yield of 154.1 bushels per acre. USDA last forecast a 13.763 billion-bushel crop, with a yield of 154.4 bushels per acre.
For soybeans, Pro Farmer forecast U.S. production at 3.158 billion bushels, with an average yield of 41.8 bushels per acre -- which would be the fourth-largest in history. The estimate is three per cent below USDA's latest outlook for a crop of 3.255 billion bushels, with a yield of 42.6 bushels per acre.
Weather also was a worry for wheat traders. A freeze in Argentina "was cold enough to damage early jointing wheat," according to Commodity Weather Group.
Spot-month September wheat climbed 20-1/4 cents to $6.54-3/4 a bushel at the CBOT.
-- Tom Polansek reports on agriculture and futures markets for Reuters from Chicago. Additional reporting for Reuters by Julie Ingwersen in Chicago, Sybille de La Hamaide in Paris and Naveen Thukral in Singapore.