Wheat futures hovered close to a seven-week high in their first trading session of 2012 on Tuesday, as adverse weather conditions in Argentina boosted hopes for an increase in overseas demand for U.S. supplies.
On the Chicago Mercantile Exchange, wheat futures for March delivery traded at USD6.5300 a bushel during early European afternoon trade, hovering just below a seven-week high of USD6.5575 it hit on December 28.
CBOT trading remained closed on Monday due to the New Year’s holiday.
Wheat futures posted strong gains in the final two weeks of 2011, rising in nine of the last ten trading sessions of the year amid lingering concerns over the South American wheat crop outlook.
Traders have been focusing on crop prospects in Southern Hemisphere countries in recent weeks, as most Northern Hemisphere grain crops have been harvested by now.
South America is the main competition for U.S. exporters and a smaller crop outlook there would likely mean greater demand for U.S. supplies.
Weather forecasts continued to indicate hot and dry weather conditions across major wheat-growing regions in Argentina, the world’s fifth largest shipper of the grain.
The dry weather conditions were likely to reduce soil moisture, potentially threatening yields and weighing on the quality of the harvest. Argentina typically starts reaping its grain in March.
The heat of the Southern Hemisphere’s summer has been compounded by La Niña, a phenomenon in which tropical waters in the Pacific Ocean turn unusually cold.
The La Nina weather pattern typically brings heavier rainfall in Asia and drier weather in South America.
Broad weakness in the U.S. dollar lent further support, as it boosts the appeal of U.S. crops to overseas buyers and makes commodities more attractive as an alternative investment.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.5% to trade at 80.17.
Elsewhere on the Chicago Mercantile Exchange, corn for March delivery traded at a seven-week high of USD6.4712 a bushel, while soybeans for March delivery traded at USD12.1188 a bushel.
Source: Forexpros