By Benjamin Parkin
Grain and soybean futures started the year with a bounce, helped higher by concerns over weather in the Americas.
Contracts for winter wheat led gains as traders fretted that freezing temperatures in the central U.S. had damaged the crop.
Limited snow cover in parts of the Plains and Midwest exposed wheat to ultra-cold temperatures. Some crops in southeastern Kansas likely suffered winterkill over the long weekend, the Commodity Weather Group said, with further damage in areas like northern Missouri and southwestern Illinois.
Analysts said it could take months to determine how much damage was done, but the turn in conditions nevertheless limited appetite for selling.
"Winterkill is a serious threat to winter wheat," said Craig Turner, a senior broker at Daniels Trading in Chicago, in a note to clients. "We will not know the extent of the damage until the spring."
Soft red winter wheat futures for March delivery rose 1.5% to $4.33 1/2 a bushel at the Chicago Board of Trade on Tuesday. Contracts for hard red winter wheat, mostly grown in the Plains, rose further yet.
Analysts said the strength in the wheat market helped corn prices higher too. CBOT March corn futures rose 0.7% to $3.53 1/4 a bushel.
Soybean futures rose on concerns about weather south of the equator. Around a third of Argentina's crop belt is too dry, analysts said, with a lack of moisture plaguing much of the country's soybean crop this growing season. Updated weather forecasts showed moisture slipping next week before a renewed bout of rain in 11 to 15 days.
CBOT January soybean futures rose 0.3% to $9.55 a bushel.
Funds also recently started to bet that soybean prices were headed lower, turning bearish in the second half of December. Money managers most recently held a net short position of almost 70,000 futures and options contracts, according to the Commodity Futures Trading Commission. That added to large existing net short positions in both corn and wheat markets.
Analysts said traders saw some broader potential for a shift in that pessimistic outlook in 2018, as funds start to take advantage of relatively low crop prices to rebalance their portfolios.
"There is an expectation that fund rebalancing will attract some buying to the commodity markets," said Tomm Pfitzenmaier of Summit Commodity Brokerage in a note to clients. "The thought is that traders will sell what is perceived to be high (equities) and buy what is perceived to be cheap (commodities)."
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