US Wheat Review on Monday: Rallies near two-week high as funds buy

 

 

Wheat futures on the Chicago Board of Trade rallied to the highest close in almost two weeks as U.S. dollar weakness and the prospect of smaller supplies spurred speculative buying.

 

December soft red winter wheat rose 18 3/4 cents to US$5.67 1/2 a bushel, the highest closing price since US$5.74 3/4 on Nov. 13. March wheat rose 19 cents to US$5.88 3/4.

 

Other wheat markets were also higher. December hard red winter wheat in Kansas City rose 17 3/4 cents to US$5.60 1/2 a bushel, while December hard red spring wheat in Minneapolis gained 17 1/2 cents to US$6.00 1/2.

 

Trend-following speculative funds, which had bet heavily on lower wheat prices in recent weeks, bought back short positions amid expectations a global oversupply will ease next year, said Tim Hannagan, senior grain analyst for PFGBest in Chicago.

 

Speculators appear to be looking past bearish near-term factors, including tepid foreign demand for U.S. wheat, Hannagan said.

 

"Wheat isn't trading demand," Hannagan said. "It's trading a restructuring of positions in the market. These trend-following funds are going from a record short position to a market-neutral position."

 

Trend-following funds are "looking at the worst of the world wheat situation being over," Hannagan said. "People see the worst of the overproduction is over and the mountain of inventories starting to decline."

 

The prospect that the delayed U.S. soy harvest would lead to a decline in soft red winter wheat acreage is potentially bullish for wheat futures longer-term, said Vic Lespinasse of GrainAnalyst.com at the CBOT.

 

Demand readings Monday continued to underscore the bearish demand fundamentals for wheat.

 

A total of 14.7 million bushels of wheat were inspected for export for the week ended Nov. 26, the U.S. Department of Agriculture said in a report Monday. The total was down from 16.1 million the previous week and at the low end of trader expectations.

 

So far this marketing year, wheat export inspections totaling 425 million bushels were down 31% from 613.3 million bushels for the same period during the previous marketing year.

 

The dollar's prolonged slump remains a bullish factor for the wheat market, analysts said. A weak dollar makes U.S. grains cheaper for foreign buyers.

 

Funds bought an estimated 5,000 wheat contracts Friday, CBOT floor sources said.