SYDNEY (Reuters) - Soybean, wheat and corn futures rose sharply on Monday on active short-covering as oil prices surged by more than $2 barrel and the dollar weakened.
"Prices are up in response to a bit of weakness we are seeing in the dollar after its rally in the last few weeks which has contributed to some weakness in the grains," said Toby Hassall, a research analyst at Commodity Warrants Australia in Sydney.
"We've also got oil sharply higher and that's spilling over into the grains," he said. At the Chicago Board of Trade, bellwether November soybean futures were trading up about 1.4 percent at $11.93 per bushel at 11 p.m. EDT.
The December wheat futures contract was up about 1.5 percent at $7.63 while December corn futures were up 1.4 percent at $5.56-1/4.
Crude oil jumped more than $2 to near $109 a barrel on Monday, rebounding from a five-month low on worries that Hurricane Ike would tear through the Gulf of Mexico, and on hopes that a U.S. bailout of its top mortgage lenders would help temper an economic downturn.
U.S. light crude for October delivery rose $2.49, or more than 2.3 percent, to $108.72 by 9:05 p.m. EDT, snapping a losing streak that knocked prices to their lowest since April.
The dollar fell against the euro but climbed on a sliding yen on Monday after the U.S. government seized control of mortgage companies Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz) to shore up the U.S. housing market and protect against more global financial turbulence.
Hassal said further rises in grain prices would depend on the dollar's direction as well as harvest sizes.
He said prospects for corn and soybean crops in the U.S. Mid-West had improved since floods two months ago that delayed plantings, but the corn crop remained vulnerable to adverse weather.
"A lot of the corn is shallow-rooted and still vulnerable to lack of rainfall and day-today weather events," said Hassall.
He said wheat prices were likely to be capped by prospects of a bumper world crop as growers had responded to record prices earlier in the year by boosting plantings and drought-breaking rain improved growing conditions in Australia.
"The fact that we have a bumper world crop this season is definitely going to keep the upside risk to prices fairly limited," said Hassall.
It was too early to predict the size of the 2007/08 Australian wheat crop, even though harvesting had began in the north-eastern state of Queensland, he added.
"There has been rain in the last few days in some key areas that has definitely improved the outlook but there's a long way to go yet," Hassall said.
Private consultancy Australian Crop Forecasters will release its latest forecast of the Australian wheat crop on Wednesday. The estimate is likely to be revised modestly downwards from the firm's last forecast of 24.06 million tonnes, made in early August.
The 2007/08 crop was just 13.0 million tonnes due to the worst drought in 100 years impacting on the harvest for the second consecutive year.
(Reporting by Bruce Hextall; Editing by Clarence Fernandez)
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