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Grains rally on weather worries, exports (Fixes day in lead)

CHICAGO: Worries about weather in the Midwest and strong demand from overseas drove wheat and corn prices higher Tuesday.

The jump in prices comes after an earlier runup followed by a round of profit-taking in recent days.

"It's just wild again. It was coming back late yesterday and it carried into this morning," a wheat trader at the Minneapolis Grain Exchange said.

At the Chicago Board of Trade, December wheat rose 18 cents a bushel to close at $4.49-1/4.

A weekly government crop update issued late Monday rated the yet-to-be-harvested U.S. spring wheat crop at 59 percent good to excellent, down four points for the week.

This fanned worries among wheat millers and exporters that blending with hard red winter wheat harvested earlier, and much of unusually poor quality, would be more difficult.

Added to this was news that Bangladesh bought 200,000 tons of unsubsidized U.S. wheat and rumours that Egypt, another big importer, had come back to the U.S. market for 300,000 to 500,000 tons after shying away earlier.

"Any hint at wheat demand makes that market explode," said Steve Bruce of E.D. and F. Man International.

Corn and soybeans also gained on renewed export demand and worries about moisture as soybeans enter a crucial period.

December corn rose 5-1/4 cents at $2.78-1/2 a bushel.

"It was tied to talk maybe 1.5 million metric tons of corn was sold over the past 24 to 36 hours," said Mark Cermak of O'Connor and Co.

Forecaster Weather Services Corp. said soil moisture levels continue to drop in many western U.S. soybean areas, increasing crop stress. Temperatures in the 90s are forecast for the western growing areas starting Wednesday, it added.

November soybeans rose seven cents to $6.05-1/2.

In New York, cocoa futures fell sharply as a week-long rally appeared at an end. Traders cited steady profit taking along with renewed selling by cocoa producing countries.

"The market basically had a short covering rally. I don't think it was anything more than that," said Steve Platt at Dean Witter.

Cocoa prices had surged $82 a ton since the beginning of August to a high on Monday of $1,318. September cocoa fell $20 a ton to $1,298.

Coffee futures ended firmer in subdued dealings, as fresh predictions for a diminished Brazilian crop drew buyers back in to the market, dealers said. December coffee closed up 1.50 cents a pound at 143.65 cents.

Crude oil and product futures ended higher, helped by expectations of drop in inventories.

September crude ended up 14 cents at $17.79 a barrel, September heating oil up 0.38 cent at 49.70 cents a gallon, and September gasoline up 0.33 cent at 54.38 cents.

After the close of trading, the American Petroleum Institute reported a drop in stocks of domestic crude oil and gasoline and a rise in supplies of distillate, the basic feedstock for heating oil. -Reuter