U.S. grain and soybean futures rose over 1 percent on Monday in a broad commodities rally as investors bet that European leaders would reach a deal to tackle a euro-zone debt crisis and took heart from an improved manufacturing indicator in China.
U.S. corn and soybeans were also underpinned by U.S. farmers holding back stocks of freshly harvested crops in the hope of higher prices after a recent sell-off.
European wheat futures saw more modest gains, with traders saying that Ukraine's return as an approved supplier for Egypt's state buyer underlined stiffening export competition.
Investors warmed to progress made by European Union leaders on Sunday towards agreeing a new package to shore up the euro zone, even if final decisions were left to a follow-up summit on Wednesday.
Share prices turned lower, however, as uncertainty remained about the outcome of the European crisis talks, showing how grain markets were tied to fragile macro-economic confidence.
Markets welcomed news that China's manufacturing sector expanded moderately in October to snap three months of contraction, soothing fears of an abrupt slowdown in the world's second-largest economy.
It's a macro-driven move rather than a move on grain market fundamentals. The China PMI coming out on the upside of expectations was a catalyst across markets for more risk on today, said Chris Gadd, analyst at Macquarie Bank.
Chicago Board of Trade December corn rose 1.46 percent to $6.58-3/4 a bushel by 1120 GMT and December wheat gained 1.74 percent to $6.43 a bushel. November soy was up 1.18 percent to $12.26-1/2 a bushel.
In Europe, January milling wheat was up 0.95 percent at 185.75 euros a tonne, helped by an easing in the euro after an earlier rise took it to a six-week high versus the dollar.
U.S. futures also found some fundamental support as farmers were reluctant sellers of their freshly cut corn and soybeans. U.S. prices are well off recent peaks and farmers have sufficient cash flow to meet expenses for now, traders said.
Internal basis levels are holding up well in the U.S. on lack of farmer selling, said Brett Cooper, a senior manager of markets at FCStone Australia.
Corn and soybean spot basis bids were steady to firm around the U.S. Midwest on Friday as slow farmer sales underpinned the basis.
Operators will be watching a weekly crop progress report from the U.S. Department of Agriculture later on Monday to see if harvesting continued to advance rapidly last week. Early last week the USDA said the corn harvest was 47 percent complete and soy was 69 percent complete.
Traders expect the USDA to show corn harvest 65 to 75 percent complete and soybean harvest 80 to 85 percent done when it issues a weekly report on Monday.
European wheat faced some fundamental pressure from deteriorating export prospects.
The decision by the state buyer in Egypt, the world's top wheat importer, to re-admit Ukraine to its list of approved suppliers could increase competition for EU wheat in addition to heavy shipments from Russia.
Analysts said Russian prices declined again last week as the harvest campaign approached a close.
* Prices as of 1120 GMT Product Last Change Pct Move End 2010 Ytd Pct Paris wheat 189.00 1.25 +0.67 252.20 -25.06 London wheat 149.00 1.25 +0.85 199.00 -25.13 Paris maize 188.00 1.00 +0.53 235.00 -20.00 Paris rapeseed 440.00 6.00 +1.38 497.25 -11.51 CBOT wheat 643.00 11.00 +1.74 794.25 -19.04 CBOT corn 658.75 9.50 +1.46 629.00 4.73 CBOT soybeans 1226.50 14.25 +1.18 1393.75 -12.00 CBOT rice 16.87 0.46 +2.73 14.00 20.51 Crude oil 87.92 0.52 +0.59 91.38 -3.79 Euro/dlr 1.38 -0.01 -0.40 1.34 3.45
*Front month contracts. CBOT contracts in cents per bushel except rice which is in dollars per hundredweight. Paris wheat in euros a tonne and London wheat in pounds per tonne.
(Additional reporting by Sarah McFarlane and Valerie Parent; Editing by Alison Birrane)