US Wheat Review on Tuesday: Extends gains on dryness, short covering

 

 

U.S. wheat futures rose Tuesday on crop concerns and short covering, extending gains from a strong rally Monday, analysts said.

 

Chicago Board of Trade May wheat closed up 8 1/4 cents at US$5.52 1/2 a bushel. Kansas City Board of Trade May wheat finished up 8 cents at US$6.05 1/4, and Minneapolis Grain Exchange, or MGEX, May wheat jumped 6 cents to US$6.39.

 

Dryness continues to be a worry for the markets, despite forecasts that indicate precipitation may be on the horizon, analysts said. There is "very little chance for significant rain during the next five days" in the U.S. southern Plains, although the six-to-10-day period offers a chance for moisture, according to private weather firm DTN/Meteorlogix.

 

In Kansas, the top wheat-producing state, 42% of the crop was in good to excellent condition as of Sunday, down from 45% a week earlier, according to the National Agricultural Statistics Service. In Oklahoma, 25% of the crop was rated good to excellent, up from 21% last week.

 

"Condition ratings continue to look dismal at the moment," said Tom Leffler, owner of Leffler Commodities. "At the moment, you've got to give it a little bit of respect."

 

There was some short covering and follow-through buying after the rally Monday, analysts said. Trend-following speculative funds have been heavily short in CBOT wheat. Commodity funds bought an estimated 3,000 contracts at CBOT, traders said.

 

"I think you're just seeing some short covering," said Sid Love, analyst for Kropf & Love Consulting. "Other than that, there isn't a lot of news."

 

 

Kansas City Board Of Trade

 

The main fundamental story for wheat remains the lack of rain in the southern Plains, as there was little other news out, traders said. Condition ratings are "still down there in an area of concern," an analyst said.

 

Weakness in the U.S. dollar was seen as a supportive factor, along with strength in outside markets like crude oil and stocks, traders said. A soft dollar makes U.S. wheat more attractive to foreign buyers.

 

"The markets are extremely quiet," a trader said.

 

 

Minneapolis Grain Exchange

 

MGEX wheat followed the other markets higher. It was somewhat surprising to see wheat extend its gains amid weakness in CBOT corn and small gains in soybeans, a trader said.

 

Very warm temperatures are leading to a rapid melting of snow in northern Minnesota and eastern North Dakota, DTN/Meteorlogix said. The melting "promises to be a significant fieldwork-delaying feature through the early spring in the region," the firm said.

 

A Farm Futures survey issued Tuesday estimated U.S. farmers are ready to plant 13.92 million spring wheat acres, down from 14.1 million in 2008. However, their intentions could shift if severe flooding develops, it said.