wheat price on a tear, page-2

Dome of heat may trigger risk premiums
Sun May 20, 2012 10:59am EDT


* High heat in Midwest may support corn
* Dome of heat seen on Memorial Day weekend
* Wheat in driver's seat on weather concerns
* Surging wheat prices may dent feed use

By K.T. Arasu
CHICAGO, May 20 (Reuters) - Investors who have been building
weather-risk premiums in U.S. wheat futures are expected to
expand their protective play into corn this week amid forecasts
for high heat and little rain.
Temperatures are set to rise in the southern portion of the
Midwest grain belt, which produces the bulk of the country's
corn and soybeans, and in the Mississippi Delta, where the
Southern corn harvest precedes that in the Midwest.
Wheat futures at the Chicago Board of Trade posted the
biggest weekly gain in nearly 16 years last week amid growing
concerns that hot and dry weather in the southern Plains could
slash yields, especially in top winter wheat state Kansas.
Kansas and other southern Plains states like Oklahoma and
Texas are just coming out of a devastating drought that parched
the region and decimated wheat production last year.
The surge in CBOT wheat futures, which hit their highest
level in nearly eight months on Friday, have reversed their
discount to corn futures -- which could mean that less wheat
could be used as an alternative feed to corn.
The U.S. Department of Agriculture has been counting on an
early winter wheat harvest to help cushion extremely tight
supplies of corn held over from last year's harvest.
"There will be a heat dome during the Memorial Day weekend
(on May 28) across the entire Midwest grain belt, with
temperatures in the 90 degrees (Fahrenheit)," said grains
analyst Tim Hannagan of PFGBest in Chicago.
"Investors are starting to build weather premiums to reflect
the uncertainty ahead of us. Without water nothing grows."
The mildest winter in decades got corn seeding off to a fast
start in the Midwest this year, and expectations are for the
harvest to begin as early as August instead of the usual
September.
But the plants are vulnerable to harsh weather, and any drop
in yields could scuttle high hopes for this year's crop to boost
ending stocks, which are projected to fall to the lowest level
in 16 years this summer in the United States.
The U.S. Department of Agriculture has forecast a record
U.S. corn crop this year at 14.790 billion bushels, with ending
stocks next summer seen at a record 1.714 billion bushels --
more than double this year's projected 851 million.

DOME OF HEAT FIRST MAJOR CHALLENGE TO CORN CROP
Meteorologist Joel Widenor of Commodity Weather Group in
Bethesda, Maryland, said a high pressure ridge would raise
temperatures in the Midwest and Delta region.
He said temperatures could be in the 80s degrees F to low
90s F this week in the southern Midwest and in the low to mid
90s in the Delta region.
Widenor said corn in the Delta region could be vulnerable to
the heat wave as the plants would be pollinating -- a key stage
of development when yields are set.
The ridge -- also referred to by traders as a dome -- could
be the first weather test for this year's corn crop which has
otherwise been thriving under favorable weather conditions.
Read rest at the following link:

http://www.reuters.com/article/2012/05/20/grains-weekahead-idUSL1E8GIERA20120520