Wheat takes a breather even as Black Sea supply fears loom

Chicago wheat futures took a breather in early trading on Thursday, after touching 3-1/2-month highs as drought in top producer Russia and a drone attack on a Ukrainian river port triggered supply concerns.

Corn futures held close to a three-month peak, supported by higher wheat prices and strength in the oil market after an Iranian missile attack on Israel.

Higher oil prices can boost demand for biofuel made from crops and Middle East instability tends to lift wheat, traders say.

Soybeans edged lower as weather forecasts predicted rain in top producer Brazil, where dry conditions have slowed planting.

The most-active wheat contract on the Chicago Board of Trade was down 0.3 per cent at $6.13-1/2 a bushel at 0205 GMT after touching $6.17, the highest since June 14, on Wednesday. Prices are up around 6 per cent so far this week.

CBOT corn was unchanged at $4.32-1/2 a bushel, having hit $4.34-1/4, its highest since June 28, in the previous session. Soybeans Sv1 slipped 0.4 per cent to $10.51-1/2 a bushel.

All three contracts fell to four-year lows in recent months but have recovered some ground as central banks cut interest rates, the US dollar weakened and adverse weather threatened supply.

The Black Sea region has had 20 per cent of its average rainfall and hot temperatures in the second half of summer and further dry weather could severely reduce winter sowing rates and next year's production potential, said Vitor Pistoia, a Rabobank analyst in Sydney.

Russia's Oryol became the latest region to declare a state of emergency on Wednesday due to poor cropping weather, while the country's grain exporters' union said recent export volumes were excessive and called for a quota mechanism to limit shipments.

Consultants Sovecon cut their 2024-25 Russian wheat export forecast to 47.6 million metric tons from 48.1 million tons.

Meanwhile, Ukrainian officials said a Russian drone attack damaged a grain facility near the Danube, a reminder that the war between the two nations could disrupt wheat supply.

Russia and Ukraine account for around 30 per cent of global wheat exports.

Dry weather also threatens upcoming wheat harvests in Argentina and Australia, where frost added to low rainfall, wiping more than a million tons off analysts' production forecasts.

Speculative funds have more than halved their net short position in CBOT wheat in the last four weeks, Pistoia said.

"This cut in 'bearishness' might be an indication that the worst is behind us for this year concerning prices," he added.