US Wheat Review on Wednesday: Ends higher on short-covering; range seen
Short covering carried U.S. wheat futures higher for the second consecutive day Wednesday, although the markets ended off session highs.
Chicago Board of Trade December wheat climbed 9 3/4 cents to US$5.33 a bushel. Kansas City Board of Trade December wheat rose 4 1/2 cents to US$5.75 1/2, and Minneapolis Grain Exchange December wheat jumped 8 cents to US$6.52.
The markets surged as bears covered short positions after being unable to push CBOT December wheat below solid support around US$5, a CBOT floor analyst said. The contract was unable to hold its session high of US$5.52 and pulled back in "vicious" trading, he said.
"I definitely think you're seeing some short covering," said Louise Gartner, analyst for Spectrum Commodities. "The way this thing so quickly rallied, you hit some stops and blew out some shorts and then you faded back down."
The quick deflation of prices indicates there is "not a great deal of buying power in the market," Gartner said. Still, wheat showed strength by closing firmer despite weakness in corn, soybeans, crude oil and stocks, a trader said.
There was some unwinding of short wheat/long CBOT corn spreads, a trader said. Gains in wheat briefly spilled over into corn, he said.
Gartner said she expects wheat to settle into a trading range that will last at least through December, when the U.S. crop is dormant and markets are generally quiet. For CBOT December wheat, the range will be roughly US$5.00-US$5.90, she said.
Selling seems to evaporate when CBOT December wheat trades around US$5. The contract's weekly low is US$5.05 1/4 and its October low was US$4.96 1/2.
"In a bigger picture, the market is forming a base," Gartner said. "I think we're carving out the parameters of a trading range."
Kansas City Board of Trade
KCBT wheat futures ended higher with CBOT wheat on short-covering, a trader said. Electronic stops were triggered on the way up, with KCBT December wheat reaching a session high of US$5.98, he said.
"Wheat's had good support at these levels for quite a while here," the trader said. The rally "didn't surprise me. You get down to where we were today, and the selling completely dries up."
There was a lack of fresh news for the wheat markets to chew on, a trader said. He said he couldn't "find any big change in the fundamentals."
Minneapolis Grain Exchange
MGE wheat futures rose as the market followed gains at the CBOT, a trader said. Volume was decent, "but most of it was spurred by Chicago," he said.
Country movement remained quiet. Producers are reluctant to sell their grain until prices rise further, a MGE trader said.
MGE December wheat hit a session high of US$6.74 before paring gains. Before rising, wheat was weaker early in the day session on follow-through selling from the overnight session and on pressure from losses in other markets.