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Grains soar to new highs

CHICAGO: Wheat and corn prices soared on Wednesday on weather worries about this year's vital U.S. crops, prompting rallies in other grain and oilseed markets and pushing commodity price indexes to fresh eight-year highs.

"No one is selling, it's just a powerful market," said Ron Kucha, a grain trader at O'Connor and Co.

Wheat at the Chicago Board of Trade for delivery in May through next March closed up the 20-cent per bushel daily trading limit. May futures ended at $5.49-3/4 per bushel, up 5 percent since Friday and 17 percent since March 19.

Contract highs were set across the board for CBOT wheat, corn, soybeans and soybean meal futures. Wheat futures in Kansas City and Minneapolis also posted limit gains.

Grain prices have been on an uptrend since late 1994, as crop failures overseas boosted demand for U.S. grains at a time government policies had steadily shrunk grain stockpiles.

The United States is the leading exporter of wheat and corn to world markets, so all eyes are on U.S. crop prospects.

"It's unbelievable, what else can you say? Wheat is not going to break until it rains," said Steve Bruce of E.D. and F. Man International.

Buying was set off on Wednesday by new forecasts for dry, hot and windy weather in much of the U.S. High Plains where the bulk of the American winter wheat crop is grown.

"The driest areas of the HRW (hard red winter wheat) belt will see no relief from prolonged drought conditions," said Weather Services Corp meteorologist Mike Palmerino.

Temperatures will also rise above 80 degrees Fahrenheit on Thursday again from Texas to Kansas, with winds also a threat.

"This further deteriorates crop conditions, which are already at historically low levels," Palmerino said.

Widespread talk circulated that many winter wheat fields were being abandoned already or ploughed under due to poor germination or "winterkill" freeze damage. Winter wheat is planted in the fall, goes dormant in winter and revives in spring.

The U.S. Agriculture Department said late on Monday that 40 percent of the winter wheat crop was in poor condition as of Sunday. A year ago, only 5 percent was rated in poor condition.

Foreign buyers remain pinched by low world stocks and continue buying up U.S. grains nervously. Egypt bought 250,000 metric tons of U.S. wheat on Wednesday despite the prices.

Weather worries and exports also drove corn, the largest U.S. crop, to a sixth day of record highs on Wednesday.

May delivery corn at the CBOT closed 9-1/2 cents a bushel higher at $4.44-1/2 after setting another all-time high for a CBOT corn contract on Wednesday morning at $4.46-1/2.

South Korea and Taiwan have kept buying U.S. corn this week despite the prices and talk that China may soon sell some corn from precious stockpiles to cash in on the prices.

Worries about dry, cold weather delaying Midwest corn planting also buoyed prices.

Soybeans jumped in sympathy, with May soybeans hitting a high of $8.04 a bushel, up 25-1/4 cents -- the first trades over $8 a bushel since January 1989. Profit-taking set in and May closed at $7.94-1/2, up 15-3/4 cents.

Oil prices also jumped to contract highs at the New York Mercantile Exchange as low stockpiles boosted values.

The American Petroleum Institute said in its weekly report that U.S. gasoline stocks fell 1.8 million barrels in the week ended Friday to stand some 11 million barrels below 1995 levels.

Inventories of crude, gasoline and distillates in the U.S., the world's biggest oil consumer, stand at or near the lowest levels in nearly two decades despite record high world production as oil companies opt to cut costs by running stocks as low as they believe their systems can tolerate.

May crude oil closed at $24.21 a barrel, up $1.15, May heating oil at 62.51 cents a gallon, up 18.7 cents, and May unleaded gasoline at 72.99 cents, up 24.77 cents.

Buoyed by the gains in grains and petroleum, The Knight Ridder-Commodity Research Bureau's index of 17 commodity futures hit a fresh eight-year high on Wednesday for the fifth straight seesion at 259.10, up 2.38 points.-Reuter