“Periods of record warmth in the West and not enough precipitation during the rainy season cut short drought relief in California this winter and prospects for above-average temperatures this spring may make the situation worse,” Jon Gottschalck, chief of the centre’s Operational Prediction Branch, said in issuing its spring outlook.

The centre, a division of the National Oceanic and Atmospheric Administration (NOAA), also said rivers in western New York and eastern New England have the greatest risk of spring flooding in part because of heavy snowpack coupled with possible spring rain.

The western U.S. is expected to see the multi-year drought continue and intensify in 2015 and extend into the northern Plains, the outlook said.

Drought is forecast to persist in California, Nevada and Oregon through June with the onset of the dry season in April.

“I see nothing that would indicate much improvement, if any improvement, in the overall situation for field crops for 2015,” said Brad Rippey, meteorologist with the U.S. Department of Agriculture, noting he expects to see a significant drop in field crops again this year in California.

“Drought is also forecast to develop in remaining areas of Oregon and western Washington. Drought is also likely to continue in parts of the southern Plains,” NOAA said.

But forecasters expect drought improvement in the Southwest, southern Rockies, southern Plains and Gulf Coast while drought is likely in the northern Plains, upper Mississippi Valley and western Great Lakes.

Above-average temperatures are favoured this spring across the Far West, northern Rockies and northern Plains eastward to include parts of the western Great Lakes, and for all of Alaska. Below-normal temperatures are most likely this spring for Texas and nearby areas of New Mexico, Colorado, Kansas and Oklahoma, the outlook said.

In the U.S. Midwest crop belt, a lack of snowfall in the northern states will mean an early planting season and little to no flooding, Rippey said. In contrast, the southern crop belt is wet and has already seen minor to moderate flooding.

“I would expect planting to go a little better in the upper Midwest this spring than it will in the Ohio Valley,” Rippey added at the presentation of the outlook.

— Christine Stebbins is a Reuters correspondent covering agriculture and ag markets from Chicago.

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The reduction in usage should hit corn plantings more than other crops, since nitrogen is the key booster of corn yields.

“What we’re seeing this season is a reduction in rates,” said Ray Carpenter, senior vice-president of agronomy for Farmers Cooperative in Ames, Iowa, referring to nitrogen bookings. “Reduced rates mean reduced yield.”

Fertilizer’s base feedstock, natural gas, is around $2.716 per million BTU, down from $4.536 last year (all figures US$). The price of anhydrous ammonia fertilizer remains high — around $650-$700/ton.

The disparity between the steep cost of fertilizer and the lower cost of natural gas is because fertilizer inventories remain thin due to 2014 shipping backlogs and because the industry is controlled by a few big players.

“The reality is input costs don’t come down as fast as the break-even price,” said analyst Sterling Liddell of Rabobank.

Crops require nitrogen, potassium and phosphorus, with corn the single biggest user of nutrients. It takes roughly one pound of nitrogen per acre to yield one 25-kg bushel of corn.

Crop specialization has made corn acres, planted year after year, increasingly dependent on nitrogen.

“I don’t want to overspend,” said Iowa farmer Mark Recker, who will begin fieldwork soon. “I’m debating how much side dressing I want to do, splitting applications. I may back off compared to previous years.”

Recker, an Iowa Corn Growers director, added: “When you had $6 corn, it drove me to put on a little higher nitrogen to get higher yields. Now you look at it much more economically.”

The U.S. Agriculture Department projects farm gate prices for corn this season at $3.50-$3.90 a bushel, versus $6.89 two years ago. Soybeans are projected at $9.45-$10.95, versus $14.40 in 2013.

Liddell said if farmers plant one million to two million fewer corn acres this spring, anhydrous ammonia could fall $50-$100 a ton.

Some analysts are more bearish.

“The cost of gas and ammonia right now is around $100 a ton. They’re selling it in Midwest for $600 a ton,” said one fertilizer industry source.

“So there’s a lot of room for prices to come down. You could see a 40-50 percent drop by the end of the year.”

— Christine Stebbins is a Reuters correspondent covering grain and oilseed markets from Chicago.

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That spurred technical buying as Chicago wheat rose to a one-week high.

“We pressed and pressed this wheat market; it needed some breathing room,” said Roy Huckabay, a grains analyst with The Linn Group.

Soybeans were also higher, notching the fourth consecutive week of gains, as a Brazilian truckers’ strike disrupted supply and grabbed attention away from an expected record harvest in South America.

“The uncertainty over the Brazilian strike situation seems to have abated but some longs are still getting in,” said Terry Reilly, an analyst with Futures International.

Brazilian truckers protesting a new fuel tax lifted their blockade of dozens of highways by Friday after police began fining and arresting protesters. But blockages remained at 59 locations across six states on Friday, down from 88 on Thursday, according to highway police.

The soybean oil market was also strong as traders exited their soymeal/soyoil spread positions on the last trading day of the month. March soyoil busted through its 100-day moving average, hitting a five-week top, after fewer-than-expected deliveries were posted against the expiring contract overnight.

Chicago Board of Trade March wheat closed 14-1/4 cents higher, or up 2.8 per cent, at $5.17-1/2 a bushel — up nearly three per cent for February (all figures US$). Kansas City March wheat also closed higher after sinking to a 4-1/2-year low of $5.17-1/4 on Thursday on sluggish exports.

Chicago March soybeans ended up 6-3/4 cents, or 0.7 per cent at $10.30-3/4. This brought the contract’s weekly gains to just over three per cent and its rise in February to seven per cent.

Chicago corn edged up 4-1/2 cents, or 1.2 per cent to $3.84-1/2, supported by an easing in the dollar after Thursday’s one-month high against a basket of currencies.

Cold weather persists across the U.S. wheat belt.

“The lack of a protective snow cover remains a concern for winter wheat in many areas from Montana to Nebraska, where widespread sub-zero temperatures were noted early today,” USDA meteorologist Eric Luebehusen said in Friday’s weather bulletin.

Traders said they were most concerned about the Nebraska wheat crop given a lack of snow cover.

Morning temperatures also plunged to -20 F (-29 C) in the upper Midwest but most of the soft red wheat crop is protected by recent snowfall, Luebehusen said.

— Christine Stebbins is a Reuters correspondent covering grain markets from Chicago. Additional reporting for Reuters by Gus Trompiz in Paris and Naveen Thukral in Singapore.

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Chicago corn and wheat also ended higher, tracking the strength in soybeans.

Chicago Board of Trade March soybeans ended 16-1/4 cents, or 1.6 per cent, higher at $10.24 a bushel (all figures US$).

“Until the Brazilian trucker strike is resolved, all you are going to do is give the shorts a reason to cover and keep the new sellers waiting for the beans to move into the world market,” said analyst Terry Roggensack of The Hightower Report.

“The supply is daunting,” added Roggensack. He said Brazilian farmers were poised to harvest a record soybean crop and that the world stockpile was set to hit a new high of 89 million tonnes.

The strike, now in its second week, has crippled supply chains as truckers blocked roads protesting a higher fuel tax. Some truckers agreed to end the strike after the government late Wednesday said it would extend a year of free financing for vehicles and pass a law to benefit the sector.

But blockages remained on Thursday afternoon on 91 roads in nine states, including top grain producers Mato Grosso and Parana, where harvest is peaking.

CBOT March corn closed up 4-1/4 cents, or 1.1 per cent, at $3.80. March wheat ended 5-1/2 cents, or 1.1 per cent, higher at $5.03-1/4 after closing steady to lower the past six days.

“I’m surprised we were lower earlier considering the farmer isn’t selling anything and prices keep going down,” said CHS Hedging wheat analyst Charles Soule. “Wheat bounced back late with the row-crops.”

Kansas City wheat futures set 4-1/2 year lows earlier in the session on a gloomy export outlook, a firm dollar and outlooks for much-needed moisture to improve the condition of the dormant hard red winter wheat crop. Life-of-contract lows were also hit in most CBOT, K.C, and MGEX wheat futures contracts.

While the U.S. Agriculture Department on Thursday said U.S. weekly exports sales of wheat were up 23 per cent from the prior week at 328,300 tonnes, year-to-date commitments remain 30 per cent below a year earlier.

“Clearly the market is still worried about the accumulation of U.S. inventories and the potential for a large Hard Red Winter crop in the season ahead,” Commonwealth Bank of Australia analyst Tobin Gorey said.

— Christine Stebbins is a Reuters correspondent covering grain markets from Chicago. Additional reporting for Reuters by Nigel Hunt in London and Naveen Thukral in Singapore.

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CBOT wheat also fell as U.S. wheat remains too pricey in world markets and continues to miss out on big tenders. The exception was Egypt buying 290,000 tonnes of U.S. wheat on Tuesday, but the purchase was financed with U.S. credit.

Corn was also weak, with volatile currency markets keeping traders on their toes. The U.S. dollar softened a bit but remained near an 11-year high, making American grain less price-competitive. In Ukraine, a leading grain exporter, the central bank halted commercial currency trading until week’s end after its currency collapsed.

The Brazilian agriculture minister said after a meeting with truckers on Wednesday afternoon the government was not easing its higher fuel tax — the issue that sparked the week-long strike — but noted truckers showed flexibility and said she was confident a solution would be reached soon.

The government had begun fining protesters and several states allowed the federal police to clear the roads, traders said.

“The sell-off was triggered by some lessening concerns about the situation in Brazil,” said Anne Frick, a senior oilseeds analyst with Jefferies-Bache. “The idea this issue might be going into the Brazilian courts has people a little more confident that truckers may back off their protests.”

U.S. traders also noted the Brazilian soymeal basis weakened on Wednesday, an indication processors were getting enough soybeans to crush despite the strike.

CBOT March soybeans ended down 8-1/4 cents, 0.8 per cent, at $10.07-3/4 a bushel, after soaring to a six-week high of $10.29 on Tuesday (all figures US$).

Chicago March wheat closed eight cents lower, or down 1.6 per cent, at $4.97-3/4 — breaking below $5 for the first time in three weeks. March corn closed down 1-3/4 cents, or 0.5 per cent lower, at $3.75-3/4 a bushel.

“The wheat market got excited about Egypt’s GASC activity this week but the reality is GASC had a coupon,” said Joe Lardy, a grains analyst with CHS Hedging. “As we continue to calculate world wheat values – the U.S. is still out of the market.”

— Christine Stebbins is a Reuters correspondent covering grain markets from Chicago. Additional reporting for Reuters by Michael Hogan in Hamburg and Naveen Thukral in Singapore.

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Additional support stemmed from a tight supply of soybeans at U.S. Gulf export terminals as icy U.S. Midwest rivers after a week of frigid temperatures slowed barges headed to U.S. Gulf export terminals.

But soybeans came off their highs late amid reports the Brazilian government was fining truckers for blocking the roads, a sign the strike may be ending, traders said.

Corn and wheat also sagged late — after early gains — following the volatile soybean trade.

Traders had been expecting China, the world’s top soy buyer, to begin shifting its business from the U.S. to South America where the harvest is under way. But Brazilian truckers protesting high fuel prices blocked main roads there, slowing the movement of grain to Paranagua, the country’s second-largest grain hub.

“The Chinese are watching this truck strike pretty closely as to whether it shifts any nearby float demand to the U.S. I don’t think it has — but if continues longer, it could,” one-cash-connected U.S. trader said.

Rain across northwestern Brazil, the largest soybean production state, was stalling harvests and also keeping the pipeline supply thin, traders said.

CBOT March soybeans closed 16-3/4 cents up, or 1.7 per cent, at $10.16 a bushel — after notching a six-week high of $10.29 (all figures US$).

“So far, Brazilian harvest selling has been guarded,” said Rich Feltes, vice-president of commodity research for brokerage R.J. O’Brien. “It will be interesting to see how much cash moves in response to the bean market breaking out to a new high.”

CBOT March corn ended down 1-1/4 cent, or 0.3 per cent, at $3.77-1/2 — the day’s low.

Chicago March wheat also came off its high late, closing steady at $5.05-3/4, while Kansas City March wheat gained on Chicago, up 4-1/2 cents, or 0.9 per cent, at $5.35-3/4 after Egypt’s GASC bought 290,000 tonnes of U.S. hard red winter wheat in its American-only tender using $100 million of U.S. government-backed credits.

“We would not have been in the ballpark” without the credit, said Shawn McCambridge, a Jefferies-Bache grains analyst, adding that the Egyptian wheat purchase “is supportive, but it doesn’t re-shape the balance sheet.”

— Christine Stebbins is a Reuters correspondent covering grain markets from Chicago. Additional reporting for Reuters by Julie Ingwersen in Chicago, Colin Packham in Sydney and Sybille de La Hamaide in Paris.

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Soybeans, which remain underpinned by a tug-of-war for nearby supplies between processors and exporters, ended mostly unchanged after bouncing from session lows. The sell-off in grains coupled with the U.S. Department of Agriculture reporting weekly soy export inspections below a million tonnes for the first time since early October pressured prices earlier in the day.

“Global wheat stocks are ample, global trade is down and the U.S. is just priced out of the market particularly with the strong dollar,” said Dennis Collins, market analyst at Chicago advisory Trilateral.

The dollar was firm on Monday, rising to its highest level in more than a week after Greece late Friday struck a four-month bailout deal with euro zone finance ministers to avoid default.

The strong dollar is weighing on corn demand, traders and analysts said, with the day’s lows hit when the nearby contract broke below its 100-day moving average.

“Export demand has been reasonable but the ethanol grind has been down. So overall demand, while good, hasn’t been extremely robust,” Collins said.

USDA’s outlook conference held in Washington, D.C., last week reminded traders that U.S. grain and oilseeds stocks will be plentiful in the coming year.

Chicago Board of Trade March wheat ended down 4-1/2 cents, or 0.9 per cent, at $5.05-3/4 a bushel after touching $5.03-1/2, its lowest since Feb. 3 (all figures US$).

March corn closed down 6-1/2 cents, or 1.7 per cent, at $3.78-3/4, falling below its 100-day moving average of $3.83-1/4.

March soybeans closed unchanged at $9.99-1/4.

“The U.S. wheat market could break down to below $5 this week as it is facing stiff competition from suppliers in Europe, mainly France,” said Kaname Gokon, general manager of research at brokerage Okato Shoji in Tokyo.

The U.S. wheat market endured a run of disappointing export news last week.

Morocco’s grain agency bought European Union wheat in a tender but received no offers in a parallel tender to buy U.S. durum and soft wheat. Earlier in the week, Egypt’s state grain buyer bought 240,000 tonnes of French and Romanian wheat after scrapping a tender for U.S. wheat only, citing high prices.

— Christine Stebbins is a Reuters correspondent covering grain markets from Chicago. Additional reporting for Reuters by Gus Trompiz in Paris and Naveen Thukral in Singapore.

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While most of the northern Midwest wheat crop is protected by snow from frigid temperatures there is a strip across the central United States, from northern Missouri to central Illinois, central Indiana and parts of Ohio, that missed the recent snowfall, leaving dormant wheat exposed to winterkill.

On Tuesday, morning lows dipped below 0 F (-18 C) in southern Illinois, southern Indiana and parts of Ohio, big SRW wheat country, with more chilly temperatures on the way, meteorologists said.

“For the next two or three mornings, through Friday, there is going to be threats of 0 to -10 F below readings in those winter wheat areas,” said meteorologist Dan Hicks of Freese-Notis Weather in Iowa.

Unprotected wheat can experience winterkill if temperatures dip below zero for four hours or more, preventing the crop from reaching its full yield potential this summer.

The extended forecast for the six- to 10-day period from the National Weather Service late Monday confirmed a cold bias continuing over the soft red winter wheat belt. The precipitation outlook for the same period looked mostly dry, intensifying drought conditions in the northern Midwest.

“Snow is likely to remain light next week in the Midwest, and some areas could still be threatened by another cold surge,” Commodity Weather Group said in its morning bulletin to customers.

— Christine Stebbins is a Reuters correspondent covering grain markets from Chicago.

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Additionally, forecasts of record soybean production in South America hung over prices.

Corn and wheat closed slightly firmer on a pre-weekend short covering bounce. Wheat was underpinned by a pickup in global demand this week after prices fell to four-month lows and a deterioration in the dormant U.S. winter wheat crop after a dry January.

Traders said the grain markets were marking time between generally favourable crop conditions in South America and the start of the Northern Hemisphere growing season. They also were waiting for the U.S. Department of Agriculture to update its world and domestic crop supply and demand forecasts on Feb. 10.

“With that lull, we are more sensitive to the outside volatility in the crude oil and dollar markets. That’s certainly true this week,” said Rich Feltes, vice-president of commodity research at brokerage R.J. O’Brien.

The U.S. dollar climbed against major currencies on Friday after government data showed U.S. jobs growth rose and wages rebounded strongly in January, bolstering views that the Federal Reserve will hike interest rates by mid-year.

While the bounce in the dollar loomed over Chicago Board of Trade corn, soybeans and wheat on Friday, all three closed higher on the week.

Chicago Board of Trade March soybeans closed down 7-3/4 cents, or 0.8 per cent, at $9.73-1/2 on Friday (all figures US$). CBOT March corn ended up 1/2 cent, or 0.1 percent at $3.85-3/4, bouncing in the last few minutes of trade.

“More choppy, rangebound trade is expected in corn until we get closer to spring planting weather conditions,” said Shawn McCambridge, a grains analyst with Jefferies Bache.

March wheat closed up 1-1/4 cents, or 0.2 per cent, at $5.27 — its first weekly rise in seven weeks, as hopes of an export breakthrough in Egypt underpinned prices.

Egypt could hold tenders for U.S. wheat in order to make use of a $100 million credit line from the U.S., the country’s supplies minister said Thursday.

The news followed a run of tenders by importing countries this week.

“Exports steering away from a very weak path are good news, but are more support than a reason for an extended rally,” Tobin Gorey, director of agricultural strategy for Commonwealth Bank of Australia, said in a note to clients.

— Christine Stebbins is a Reuters correspondent covering grain markets from Chicago. Additional reporting for Reuters by Gus Trompiz in Paris and Naveen Thukral in Singapore.

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Outlooks for the driest areas of Brazil’s crop region calling for rain this week and the falling crude oil market also hurt soy prices.

“Today, cooler heads prevailed and we’re seeing a correction, the move in beans was especially overdone,” said Joe Lardy, a grains analyst with CHS Inc., the largest U.S. farm co-op. “There wasn’t a good fundamental reason behind Tuesday’s rally.”

Chicago corn and wheat were also lower after both jumped four per cent on Tuesday.

“I’m surprised the wheat markets aren’t down a little more given that we’re not competitive in world business,” said Lardy, noting the U.S. continues to miss out on global tenders as U.S. wheat is running $20-$30 per tonne higher than European wheat (all figures US$).

Saudi Arabia, Egypt, Iraq, Jordan, Bangladesh and South Korea have all purchased or tendered for wheat this week.

“Wheat is being underpinned by the stronger global demand seen after wheat dropped to four-month lows earlier in the week,” Frank Rijkers, agrifood economist at ABN AMRO Bank.

Statistics Canada also released its Dec. 31 stocks data on Wednesday, which landed within traders’ expectations. StatsCan said all-wheat stocks were 24.8 million tonnes, the second-largest in 18 years.

Canola supplies totalled 11.1 million tonnes, the second-highest ever, and soybean stocks jumped 29.4 per cent to a record 3.5 million tonnes.

Chicago Board of Trade March soybeans closed down 15 cents, or 1.5 per cent, at $9.72 a bushel.

Chicago wheat ended at $5.11, down 2-3/4 cents or 0.5 per cent, while March corn was at $3.83-1/2, down 2-1/4 cents or 0.6 per cent.

Brian Basting, an economist with Advance Trading, said the weekly U.S. Energy Information Administration ethanol grind numbers were a “little negative” for corn, while forecasts for the parched northeastern region of Brazil to see beneficial rains later this week pressured soybeans.

EIA showed a weekly drop in corn ethanol production of 30,000 barrels per day to 948,000 bpd, the lowest production since the first week of November 2014.

— Christine Stebbins is a Reuters correspondent covering grain markets from Chicago. Additional reporting for Reuters by Michael Hogan in Hamburg and Colin Packham in Sydney.

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