Chicago wheat futures held largely steady on Monday as forecasts of crop friendly weather in the United States weighed on the market and counteracted the supportive effect of a fall in the dollar. Support also came from Iraq's purchase of 400,000 tonnes of wheat, of which 300,000 tonnes was US wheat, in its latest tender.
Corn was little changed, while soybeans were mixed, torn between bearish pressure from the wheat market and underpinning from rising crude oil prices and a weaker dollar. Analysts said violence in North Africa and the Middle East was expected to have a mixed impact on the agricultural markets.
While it is likely to hit the region's economy, thereby curbing demand, a spike in crude oil values was expected to lift the cost of producing grains, said Luke Matthews, a commodity strategist at the Commonwealth Bank of Australia. "Moves that we are seeing in crude oil are adding to the cost of agricultural production," he said. The dollar remained stuck near a four-month low against a basket of major currencies on Monday and struggled to gain ground after US jobs data last week came in a bit better than expected, but disappointed some investors who had been bracing for an even stronger report.
Chicago Board of Trade May wheat fell 0.1 percent to $8.31-1/2 a bushel. CBOT May corn rose 0.2 percent to $7.29-1/2 a bushel and May soybeans were up 0.1 percent to $14.15-1/2 per bushel. Crude oil prices rose to 2-1/2 year highs as worries about supply disruption increased due to the deepening unrest in Libya, while Asian stocks slipped on Monday as concerns about the Middle East also weighed on equities.
Troops loyal to Muammar Gaddafi launched counter-offensives against rebel-held towns on Sunday, increasing fears that Libya is heading for a civil war rather than the swift revolutions seen in Tunisia and Egypt. A reasonably strong batch of US data that showed the jobless rate falling to a near two-year low failed to boost sentiment, as investors remained firmly focused on the developments in the Middle East and the resulting longer-term impact on oil. Crude oil often influences moves in corn and soy prices due to their increasing role in making alternative fuels.
FAO WARNS ON FOOD PRICES The United Nations's FAO said on Monday climate change bringing floods and drought, growing biofuel demand and national policies to protect domestic markets could drive up global food prices and threaten long-term food security.
It also said that a declining stock to utilisation ratio for major grain stocks like wheat and maize was a concern. There were forecasts of some beneficial weather in the US Plains that could reduce wheat crop stress caused by drought. "Some beneficial precipitation is expected for wheat over northern Kansas, north-east Colorado and south-west Nebraska on Tuesday," said Mike Palmerino, agricultural meteorologist with Telvent DTN.
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