U.S. grains notched their highest prices in three weeks on Monday, with corn posting its longest rally since June after a government report last week forecast stockpiles in the world's top producer to hit a 17-year low by summer's end.
Soybean futures jumped more than 3 percent for the biggest daily bounce since August following the announcement of No. 1 soy importer China's fourth large purchase of U.S. soybeans in two weeks.
Sustained drought conditions in the southern U.S. Plains wheat belt and a turn to dry conditions in Argentina also propped up grain markets, with wheat rising sharply the second straight session.
"There is a weather element that is starting to develop. We've got some talk of La Nina in Argentina. Argentina was flooding; now it's turned hot and dry," said Roy Huckabay, analyst at brokerage The Linn Group in Chicago.
Severe drought reduced harvests last year in both the United States and South America.
Expectations for a rebound in corn and soybean production in Brazil and Argentina last week helped bring grain prices to six-month lows before they rebounded in the wake of the U.S. Agriculture Department's forecast on Friday for tighter grain stocks.
"We're getting some fairly good follow-through buying after the report last week," Citigroup futures specialist Sterling Smith said during the trading session.
A weaker dollar also supported grains, with the greenback hitting an 11-month low against the euro and making commodities priced in the U.S. currency more attractive to importers. The Thomson Reuters Jefferies index of 17 commodities jumped to a five-week high.
Chicago Board of Trade corn futures for March delivery gained 2.2 percent, or 15-1/4 cents, to $7.24 per bushel, posting their biggest daily increase since October.
Corn had their sixth straight session of gains - the longest streak of higher prices since the first days of the June rally that stirred futures to a record peak in August.
Most-active March soybeans climbed 44-3/4 cents to $14.18 per bushel, a gain of 3.3 percent and their largest daily increase since Aug. 9.
Soybean futures declined following the release of USDA's monthly supply and demand report on Friday even as the government forecast the tightest stocks-to-use ratio since 1965. "It's a little delayed reaction to the report," Central State Commodities president Jason Britt said of Monday's rally. Speculators last week slashed bullish long bets in soybeans by the most in more than a year, putting the commodity at risk of a bounce if traders cover short positions.
Weather in Argentina, the No. 1 export of soybean products, also is turning drier even as forecasts overall in South America remained largely beneficial to developing crops.
"There's a combination of the things that jarred the market just a little bit," Britt said.
CBOT March wheat rose 12-1/4 cents to $7.67 per bushel, the highest since the first trading session of the new year.
The wheat market is being buoyed by dryness in the U.S. Plains, which threatens to curb winter crop yields.
USDA estimated U.S. winter wheat seedings at 41.82 million acres (16.92 million hectares) in its monthly report on Friday, 2 percent less than expected.
"The market was overly optimistic about supply ahead of the publication, so prices are likely to continue to rise," Commerzbank said in a note.
The U.S. government declared much of the central and southern wheat belt a natural disaster area last week due to persistent drought that imperils this year's winter wheat crop.
As of Dec. 1 the United States had 8.03 billion bushels of corn on hand, the USDA said, below even the low end of market expectations averaging 8.28 billion.
Inventories at the end of the crop's marketing year on Aug. 31 are estimated at a 17-year low of 602 million bushels, less than a three-week supply and almost 10 percent smaller than expected.