US Wheat Review on Wednesday: Rallies on technical buying, outside markets

 

 

U.S. wheat futures climbed Wednesday in a technical bounce from recent losses and supported by firm outside markets.

 

Chicago Board of Trade May wheat surged 21 1/4 cents to US$5.23 a bushel. Kansas City Board of Trade May wheat jumped 21 3/4 cents to US$5.67, and Minneapolis Grain Exchange May wheat rose 16 3/4 cents to US$6.06.

 

Wheat was due for a recovery and saw some short-covering, traders said. Speculative funds hold a large net short position in CBOT wheat, they said.

 

Rallies in equities and crude oil opened the door for the rebound, while strength in the neighboring CBOT corn and soybean markets added support, analysts said. Weakness in outside markets weighed heavily on grains Monday.

 

"Everybody, I think, in the commodity world has felt that we could get a little bounce in these commodities on their own merits, but the first thing you look at is 'What's the Dow doing?'" said Jason Britt, president of Central State Commodities. "When you have green on your screen from the equities, that helps."

 

Wheat could extend Wednesday's recovery if market participants were to trade it on its own merits, Britt said. Dryness in the U.S. Plains and sentiment that CBOT May wheat found value around US$5 are supportive, he said.

 

"As a trader, as a broker you have to constantly hedge your bets," Britt said. "In the environment that we're in right now, you sure have to take [outside markets] into account."

 

 

Kansas City Board of Trade

 

Traders continue to worry about dryness in the U.S. Plains as warm weather coaxes hard red winter wheat out of dormancy, market analysts said. The crop goes dormant during the winter to protect itself from the cold weather.

 

Forecast models show a potential increase in rain in the far southeastern Plains next week, but only on the fringes of the wheat belt, Cropcast Agricultural Weather said. That should keep most of the southern Plains dry, the private weather firm said.

 

Informa Economics said in a note: "Dry conditions in the southern Plains are expected to become more of a focal point, particularly if the coming week passes without any appreciable moisture."

 

"While a continuation of the dry pattern would be expected to add some risk premium to futures prices, U.S. wheat stocks are large enough to absorb a moderate production shortfall," Informa Economics added.

 

 

Minneapolis Grain Exchange

 

The outside markets remained a focus for wheat, which was in an oversold condition, traders said. Prices rose as the "overall tonnee" in commodities was stronger, they said.

 

Traders will look at the U.S. Department of Agriculture's weekly export sales report, due at 8:30 a.m. EST Thursday. Export sales of U.S. wheat are expected to be 300,000 to 500,000 tonnes.