Wheat hits 2-week high on U.S. weather worries

Chicago wheat rose for a fourth consecutive session on Monday to hit its highest in more than two weeks as adverse weather forecast for U.S. wheat belts encouraged short-covering by investors after a 5-1/2 year price low last week.

Corn drew support from wheat to reach its highest in more than a week, while soybeans rose to a two-week peak as the oilseed continued to find support in brisk Chinese demand as well as a broader recovery in commodities.

The most active wheat futures contract on the Chicago Board of Trade climbed 1.0 percent to $4.65-1/2 a bushel, near the session peak of $4.66-3/4 a bushel that was its highest since Feb. 18.

"It is forecast to be wet in soft red wheat growing regions and remain dry in the hard red wheat regions, which has the market a little spooked," said Andrew Woodhouse, senior grains analyst at Advance Trading Australasia.

The weekly U.S. Drought Monitor, released on Thursday, showed that 21 percent of Oklahoma, the No. 3 winter wheat state last year, was "abnormally dry," up from 1 percent a week ago.

Heavy rains in India, which officials on Monday said had damaged crops including wheat and could delay harvesting, also reinforced the prospect that the major wheat producer will need to import in the coming months.

The latest developments in Egypt, meanwhile, suggested the world's biggest wheat buyer was turning away from a strict policy on the grain fungus ergot that has disrupted its import tenders.

Egypt will allow wheat imports with trace levels of the ergot fungus of up to 0.05 percent, the agriculture ministry said on Monday, a day after the head of the ministry's quarantine authority was replaced.

The most active corn futures rose 0.8 percent to $3.61 a bushel, near the session high of $3.62-1/4 which was its strongest since Feb. 25. The most active soybean futures rose 0.5 percent to $8.82-3/4 a bushel. That was close to the session high of $8.86-1/2 a bushel, which a level last touched on Feb. 22.

"Prices have been lent buoyancy by a combination of unfavorable weather conditions in the U.S. Midwest, growing demand and short-covering," Commerzbank analysts wrote of the broad rise in grains and soybeans.

Traders say investment funds have moved to cover some of their large short positions in recent days, after further building up short bets in the week to March 1. But the rally in grains was capped by a stronger dollar on Monday as well as a backdrop of large global supplies.