US Wheat Review on Monday: Jumps on spillover support from corn, soy

 

 

Rallies in neighboring markets and technical buying lit a fire under U.S. wheat futures Monday, but traders said it will be difficult to sustain the gains.

 

Chicago Board of Trade May wheat ended up 11 1/4 cents, or 2.2%, at US$5.15 1/4 a bushel. Kansas City Board of Trade May wheat jumped 10 1/4 cents, or 2%, to US$5.19 1/2. Minneapolis Grain Exchange May wheat closed up 9 cents, or 1.7%, at US$5.28 1/2.

 

Wheat felt spillover support from advances in neighboring CBOT corn and soy, traders said. Commodity funds were buyers of grains and soy and bought an estimated 4,000 wheat contracts at CBOT.

 

Wheat is linked to the other markets because funds often trade in a basket of commodities and because corn and wheat are both used for animal feed. May soy ended up 1.5%, and May corn jumped 3%.

 

CBOT May wheat stormed to a session high of US$5.17 3/4 before trimming gains slightly. It finished well above its session low of US$4.99.

 

CBOT wheat is vulnerable to technical short-covering rallies because non-commercial speculative funds hold a massive short position. They were net short 65,303 contracts as of Feb. 16, down from a record of 74,767 contracts a week earlier, according to the latest supplemental Commodity Futures Trading Commission report.

 

"You've got this huge short position in the wheat," said Alan Brugler, president of Brugler Marketing & Management. Periodically, market participants say, "I don't want it to be a nightclub fire scenario here," he said. "I'm going to lighten up a little bit. I don't want to get caught up when everybody tries to leave."

 

 

Kansas City Board of Trade

 

KCBT May wheat finished near its session high of US$5.23 1/4 and well above its session low of US$5.05.

 

There was a lack of fresh fundamental news to spark the rally, traders said. It will be difficult to sustain the gains because wheat supplies are seen as large and there is stiff competition for export business, they said.

 

"Wheat looked like it just kind of followed along" with corn and soy, Brugler said. "We're still in surplus stocks situation, so it doesn't usually last very long. I'd lean toward a turnaround Tuesday pullback.""

 

 

Minneapolis Grain Exchange

 

MGE May wheat settled near its session high of US$5.32 1/4 and well above its session low of US$5.16.

 

Weekly U.S. wheat export inspections of 17.708 million bushels were toward the high end of analysts' estimates, which ranged from 14 million to 18 million. The data was "nothing earth-shattering," Brugler said.