Wheat futures in Chicago rebounded after posting the steepest decline since January yesterday, as drought in Argentina and the increased threat of the El Nino weather phenomenon raised concern global supply may drop. The Buenos Aires Cereals Exchange yesterday lowered its estimate of wheat planting in drought-hit Argentina, South America’s largest exporter, to 3.2 million hectares (7.9 million acres), down from a May 27 estimate of 3.7 million hectares. The likelihood of El Nino conditions developing this year is probably greater than 50 percent, Australia’s Bureau of Meteorology said yesterday. “When you’re dealing with Mother Nature, that could have devastating effects on crops,” Peter McGuire, managing director of Commodity Warrants Australia Pty, said by phone today. “If the output is down, then you’ll probably see a little bit higher wheat prices.” Wheat for July delivery advanced as much as 1.2 percent to $6.2475 a bushel in after-hours electronic trading on the Chicago Board of Trade. The most-active contract was at $6.2350 at 10:59 a.m. Singapore time after losing 7.8 percent yesterday, the steepest decline since Jan. 12. Corn for July delivery gained 0.8 percent to $4.36 a bushel after ending 3.8 percent lower yesterday, the biggest drop since Feb. 17. Soybean futures advanced 1 percent to $11.9325 a bushel after dropping 2.2 percent yesterday. Still, demand for grains and oilseeds from investors seeking a hedge against inflation may wane if the dollar sustains its rally, McGuire said. The Dollar Index, which tracks the greenback against six major currencies, gained 1.4 percent yesterday, the biggest advance since Jan. 20, on concern an economic recovery may be too weak to sustain gains in higher-yielding assets, encouraging investors to seek safety in the U.S. currency. The gauge was little changed at 79.344 at 11 a.m. in Singapore. “If the dollar index goes back to 80, you might see a softening in grains,” McGuire said.

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