Grain futures - Weekly outlook: February 20 - 24

Investing.com - U.S. grain futures ended the week broadly higher on Friday, with soybean futures rallying to a four-month high after China signed deals for a record-setting purchase of U.S. soybeans, while wheat and corn prices were also boosted amid indications of growing demand for U.S. supplies.

Agricultural commodities received a lift Friday amid optimism that an agreement on a second bailout for Greece worth EUR130 billion would be reached at Monday's meeting of euro zone finance ministers.

Without a bailout, Greece faces the threat of defaulting when a EUR14.5 billion bond redemption comes due on March 20.

On the Chicago Mercantile Exchange, soybeans for March delivery settled at USD12.6662 a bushel by close of trade Friday, the highest since October 14. On the week, prices gained 2.3%, the fourth consecutive weekly advance.

Soy prices rose to the highest level since mid-October on Friday after the U.S. Department of Agriculture said that U.S. farmers sold 2.923 million metric tons of the oilseed to China in the biggest one-day sale on record.

The sale includes 2.75 million tons for delivery in the marketing year that begins September 1 and 173,000 tons prior to August 31.

The news came after a Chinese trade delegation signed agreements with U.S. grain companies on Wednesday to buy 8.62 million tonnes of soybeans from the U.S.

U.S. Agriculture Secretary Tom Vilsack said the sales highlight a strong relationship he expects will expand.

Lingering concerns over damage to the soy crop in Brazil further underlined expectations that China would import fewer soybeans from the South American country and increase its reliance on U.S. supplies.   

China imports 60% of soybeans shipped around the world, with the bulk of its purchases coming from the U.S. and Brazil, the world's top exporters.

Meanwhile, wheat for March delivery settled at USD6.4412 a bushel by close of trade on Friday, the highest since February 9. The contract gained 1.4% on the week.

Wheat prices surged 2.35% on Friday after Egypt’s state grain buyer, the General Authority for Supply Commodities, confirmed that it purchased 180,000 tonnes of U.S. wheat.

The order followed an Egyptian purchase on February 11 of 55,000 tonnes of U.S. wheat, the first order since June.

Egypt is the world’s largest wheat importer. In recent months, the Middle Eastern country has favored purchases of cheaper French wheat and grains from the Black Sea-region countries.

Concerns that Ukraine will limit wheat exports lent further support after state- media outlets reported that Ukrainian grain traders agreed to limit wheat exports to 1.7 million tonnes in the February-through-July period, following a request from the government, amid concerns over a shortage of supplies in the domestic market.      

Ukraine is expected to lose a large share of its winter grains this year due to bad weather.

Ukraine limited exports in the 2010/11 marketing season by introducing export quotas and imposing grain export duties in the first few months of the current season after the 2010 harvest was hit by drought.    

Elsewhere on the Chicago Board of Trade, corn futures for March delivery settled at USD6.4188 a bushel by close of trade on Friday, adding 1.05% on the week.

Earlier in the day, prices rose to USD6.4662 a bushel, the highest since February 9 after data showed that export demand for U.S. corn remained strong in the previous week.

U.S. farmers sold 1 million tonnes of corn for export delivery, up 41% from a week earlier.

Speculation over worsening crop conditions in major South American corn-growers, Argentina and Brazil also provided support.

Traders have been focusing on weather conditions and crop prospects in South American countries in recent weeks.

South America is major grain exporter and competes with the U.S. for business on the global market. A smaller crop outlook there would likely mean greater demand for U.S. supplies.

Corn is the biggest U.S. crop, valued at USD66.7 billion in 2010, followed by soybeans at USD38.9 billion, government figures show. Wheat was fourth at USD13 billion, behind hay.

In the week ahead, grain traders will continue to monitor South America's corn and soybean crop and how La Nina weather patterns will affect yields. Russian and Ukraine winter-wheat crop conditions will also be in focus.

Floor trading on the Chicago Board of Trade will remain closed Monday, February 20 for the Presidents Day holiday.