Chicago Board of Trade (CBOT) wheat futures rose to a three-week high on Wednesday on brisk demand from feeders and exporters, while corn rose to a six-week high with the market buoyed by tight stocks, firm cash and slow farm sales.
“Wheat strength is the easier trend to identify today. Wheat remains very competitive to corn, underpinning its demand as feed,” said Bryce Knorr, senior editor for Farm Futures magazine.
“Short-covering remains one primary cause of buying, with hedge funds short in both Kansas City and Chicago,” he said.
Soft red winter wheat basis bids, the kind of wheat traded on the CBOT, rose five cents per bushel at elevators in Chicago and northern Indiana late on Tuesday, cash merchants said (all figures US$).
Soybeans rallied after falling for six straight sessions, supported by tight U.S. soy supplies, concerns about shipment delays in Brazil and belief that China will repurchase soybeans after cancelling import contracts with Brazil.
A falling dollar, firm crude oil and gains in the stock market helped underscore advances in grains and soybeans.
CBOT May wheat futures were up 14 cents per bushel at $7.36 and Kansas City Board of Trade (KCBT) hard red winter wheat for May delivery was up 12-1/4 at $7.64.
Chart-based traders said CBOT wheat had technical strength today, including May breaking through a double-top at $7.25 and the March 1 high of $7.26-3/4, setting off some short-covering.
Technical traders said the next target was the 40-day moving average moving average at $7.39-1/2.
European milling wheat futures rose to a one-month high, boosted by a jump in CBOT futures and a break in the Paris wheat market above a recent technical resistance level.
CBOT May corn was up four cents per bushel at $7.32-1/2 and May soybeans were up 13 cents at $14.19-3/4.
U.S. wheat exports, already brisk, are expected to rise further in the near future as rival suppliers Australia and the Black Sea region run low on surplus stocks to sell in global markets after poor harvests.
“Wheat is continuing to profit from robust demand,” Commerzbank analyst Carsten Fritsch said, stressing strong international purchase interest.
A mill in Oman bought 10,000 tonnes of Indian wheat on Wednesday and Algeria bought 350,000 tonnes of optional-origin wheat.
Also, Jordan’s state grains buyer has issued a tender to buy 100,000 tonnes of milling wheat, Bangladesh is seeking to import 50,000 tonnes, while Iraq is tendering for at least 50,000 tonnes and Iran has recently enquired about buying U.S. wheat.
“Wheat has been trading on U.S. weather in the past but now the focus has shifted to exports,” said Joyce Liu, an investment analyst at Phillip Futures. “We are seeing strong demand for U.S. wheat from the overseas market.”
Demand in the United States for wheat as animal feed may become robust after corn became more expensive than wheat following the U.S. Department of Agriculture’s (USDA) forecast that U.S. corn stocks at the end of this summer will be the smallest in 17 years, traders said.
Canadian corn bought for biofuel
In the corn market, tight U.S. old-crop supplies and a firm U.S. cash market continued to support prices.
U.S. cash corn spot basis bids were mostly steady to firm around the U.S. Midwest as tight supplies and slow farmer sales kept the basis at the highest levels ever for this time of year.
Cash corn jumped to 50 cents per bushel above benchmark CBOT May corn at a processor and ethanol plant in Cedar Rapids, Iowa, the highest since the record basis of 55 cents last June, Reuters records showed.
“We are getting strong signals that the U.S. supply is going to be down again in the USDA’s quarterly report,” said Liu. “In fact, some Canadian corn is flowing into the U.S. for ethanol production as the cash market is very tight and farmers are not selling.”
Tight supplies of U.S. corn are expected to again be confirmed in USDA’s quarterly stocks report due at noon ET on March 28. The USDA will release prospective plantings of U.S. crops at the same time.
USDA is also expected next week to report an historically tight supply of soybeans.
“Strong demand has us projecting a 925-million-bushel March 1 stock number, which is 450 million bushels lower than last year and the second lowest first half U.S. stocks since the 1988-89 crop year,” said Jerry Gidel, an analyst for Rice Dairy LLC.
Gidel advised clients to cover their cash protein needs through the first half of May.
— Sam Nelson covers the CBOT futures markets for Reuters from Chicago. Additional reporting for Reuters by Michael Hogan in Hamburg, Naveen Thukral in Singapore, Michael Hirtzer and Julie Ingwersen in Chicago.