GRAINS-Wheat hits 2-month high on Ukraine concerns; firm corn, soy relieves

(Updates with US closing prices)

By Julie Ingwersen

CHICAGO, Sept 22 (Reuters) – U.S. wheat futures hit new two-month highs on Thursday, buoyed by risks of escalating conflict in Ukraine and dry weather in cropping areas of Argentina and of the American plains, traders said.

Commodity funds hold a net short position in Chicago Board of Trade wheat futures, leaving the market prone to periods of short coverage.

CBOT December Wheat settled down 7 cents at $9.10-3/4 a bushel after hitting $9.22-1/2, its highest since July 11.

Corn futures followed wheat higher while soybeans fell. December Corn CBOT ended up 2-3/4 cents at $6.88-1/4 a bushel and November soybeans ended down 4-1/4 cents at $14.57 a bushel.

Wheat futures ignored pressure from disappointing weekly export sales from the United States and an increase in global wheat production predicted for 2022/23 by the International Grains Council.

Brokers seemed instead focused on fears of further disruption to the Black Sea grain trade which has been partially restored through a shipping corridor from Ukraine. President Vladimir Putin on Wednesday ordered a Russian mobilization to fight in Ukraine and hinted that he was ready to use nuclear weapons.

“It’s mostly about Russia and Ukraine, and what’s going on there,” Chicago-based Price Futures Group analyst Jack Scoville said of CBOT wheat strength.

Also bullish, the Argentine grain exchange Rosario lowered its forecast for wheat and corn production on Wednesday, reflecting the impact of a prolonged drought.

Dry conditions are gripping the southern plains of the United States, where farmers are planting the 2023 winter wheat crop. The weekly US Drought Monitor report showed “extreme drought” conditions in 53% of Kansas , the top U.S. winter wheat state, down from 42% a week earlier.

“It’s still dry in the Plains, although there are some showers, so the new crop isn’t bringing any benefit,” Scoville said.

Trading in corn and soybean futures was subdued as brokers awaited the results of the U.S. harvest of the two crops, which is just beginning in the Midwest crop belt.

Macro concerns loomed in markets a day after the U.S. central bank raised rates by 75 basis points for the third time, as expected, and raised its rate target to its highest level since 2008.

“The Fed does recognize that a recession is coming, but inflation will not fall quickly and there will be a lot of pain,” ING economists said in a note. (Additional reporting by Gus Trompiz in Paris and Enrico Dela Cruz in Manila; Editing by Sherry Jacob-Phillips; Krishna Chandra Eluri, Andrea Ricci and Grant McCool) ((; 1-313-484-5283; Reuters email: Keywords: GLOBAL GRAINS/ (UPDATE 3)

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