US Wheat Review on Monday: Rallies hard on short-covering, technicals

 

 

Short-covering and technical buying pulled U.S. wheat sharply higher Monday as traders continued to watch weather forecasts in dry areas of the U.S. Plains.

 

Chicago Board of Trade May wheat closed up 26 cents at US$5.44 1/4 a bushel. Kansas City Board of Trade May wheat gained 27 1/4 cents to US$5.97 1/4, and Minneapolis Grain Exchange May wheat surged 23 3/4 cents to US$6.33.

 

Holders of short, or sold, positions came in to cover their positions as the market surged above resistance levels, said Shawn McCambridge, analyst for prudential financial. Noncommercial speculative funds were net short 42,943 contracts in CBOT wheat futures and options as of March 10, according to a supplemental report issued Friday by the Commodity Futures Trading Commission.

 

CBOT July wheat, which represents the new crop, rose above resistance levels around US$5.51 and then at US$5.56, McCambridge said. The contract hit a one-month high of US$5.58 in open outcry trading and closed up 26 cents at US$5.56 3/4.

 

Nearby CBOT May wheat hit a one-month high of US$5.45 in open outcry trading. Commodity funds bought an estimated 4,000 contracts.

 

Weakness in the U.S. dollar supported the rally because it makes U.S. grain more attractive to foreign buyers, analysts said. Gains in equities and in CBOT soybeans and corn helped create a positive tonnee, they said.

 

"I think this is short-lived, but it's certainly more of a surge than I thought we'd see," said Rich Feltes, senior vice president of research for MF Global.

 

 

Kansas City Board of Trade

 

Outside markets, including stocks and the dollar, were "very plainly putting a lot of support" into KCBT wheat, a floor trader said. There was continued talk about the potential for crop losses due to dryness in hard red winter wheat areas of the U.S. Plains, he said.

 

The Plains wheat belt will stay dry for the next five days, although there is a chance of precipitation in the six-to-10-day period, Cropcast Agricultural Weather said in a forecast. "The question is whether (rain) is going to hit the southern areas" that are the driest, a trader said.

 

"There are still the same old production concerns in the Plains, but I don't think that's something that would give us 25 cents higher," McCambridge said. "There's still time for the weather to start becoming more favorable. We've seen wheat crops in the past rebound very nicely."

 

It would not be surprising to see a pullback Tuesday, traders said.

 

"We were so high on such thin volume that I think this thing has got to set back, even if it's just a little profit-taking," a trader said.

 

 

Minneapolis Grain Exchange

 

MGE wheat closed higher on technical buying and spillover support from other markets, a trader said. The rally in CBOT wheat lent strength to MGE wheat, he said.

 

It seems there is "growing concern up in spring wheat country, up in the Red River Valley that the wheat area will be down as much or more than" the U.S. Department of Agriculture projected, Feltes said. The USDA predicted spring wheat acres would fall 900,000 acres from last year.

 

There are worries that the ground may be too soggy to plant spring wheat in the spring, Feltes said. Spring wheat is planted in the U.S. northern Plains.