US Wheat Review on Tuesday: Corn, soy gains spur short-covering rally

 

 

U.S. wheat futures closed solidly higher Tuesday as gains in Chicago Board of Trade corn and soy ignited a short-covering rally, traders said.

 

CBOT December wheat closed up 16 1/2 cents at US$4.70 1/2 a bushel. Kansas City Board of Trade December wheat ended up 14 3/4 cents at US$4.82 1/4, and Minneapolis Grain Exchange December wheat finished up 14 3/4 cents at US$4.99 1/2.

 

Non-commercial speculative funds continue to hold a large net short position in CBOT wheat, traders said. As of Sept. 8, speculative funds were net short 69,122 contracts in CBOT wheat futures and options, according to a supplemental Commodity Futures Trading Commission report.

 

Commodity funds bought an estimated 4,000 wheat contracts at the CBOT on Tuesday.

 

Spillover support from rallies in CBOT corn and soy helped lift wheat as the row crops jumped on jitters about the potential for a frost to hurt immature crops next week, traders said. Cold weather won't hurt wheat plants as winter wheat planting has just started and spring wheat is being harvested.

 

The markets trimmed gains before the close. CBOT December wheat, which set a new contract low of US$4.50 in overnight electronic trading, hit a day session high of US$4.81 1/2, its highest price since Sept. 3.

 

The markets rallied even though Egypt snubbed the U.S. in a tender and bought 240,000 tonnes of Russian wheat. Egypt, a major buyer on the world wheat market, is known for being price conscious.

 

 

Kansas City Board of Trade

 

Gains in CBOT corn and soy and in outside markets were supportive for KCBT wheat, traders say. Weakness in the U.S. dollar and gains in crude oil sent bullish signals to the grains, they say.

 

It will be difficult for wheat to sustain its gains given large world supplies and lackluster export demand, analysts said. The U.S. Department of Agriculture estimates world wheat ending stocks for 2009-10 at 186.61 million tonnes, up from 122.6 million in 2007-08.

 

KCBT December wheat hit a session high of US$4.94 1/4, its highest price since Sept. 4.

 

 

Minneapolis Grain Exchange

 

MGE wheat closed firmer as it followed corn and soy higher, traders said. Wheat wanted to "join the party" happening the neighboring markets, an analyst said. MGE December wheat hit a session high of US$5.12 3/4, its highest price since Sept. 3.

 

The U.S. spring wheat harvest is continuing to advance, with dry weather expected to be favorable for cutting during the next week or so, traders said. Cutting was 69% complete as of Sunday, compared to 91% last year and the five-year average is 92%, according to the USDA. Harvest is behind schedule after the crop was planted late in the spring.