U.S. grains: Wheat rallies on bargain-buying, fund short-covering

(Stephen Ausmus photo courtesy ARS/USDA)

Chicago | Reuters — U.S. wheat futures rose roughly two per cent on Tuesday to hit a one-week high on bargain buying and concerns about crop prospects in the southern Midwest, traders said.

Soybeans were also higher while corn futures firmed, rallying from contract lows as wheat advanced.

At the Chicago Board of Trade, March wheat settled up 9-1/4 cents at $4.75-3/4 per bushel (all figures US$). March soybeans ended up 4-1/2 cents at $8.65-3/4 a bushel.

CBOT wheat rose on bargain buying a day after the March contract fell to a 3-1/2-week low. Traders were assessing the impact of flooding in soft winter wheat areas of the southern U.S. Midwest, including Illinois and Missouri.

However, some said short-covering by commodity funds was the main driver.

“Nobody gets too worked up about wheat conditions at this time of year. That being said, funds are short, and any little thing can spark some short-covering. That is probably what we are seeing here,” said Joe Vaclavik, president of Standard Grain, a Chicago-based brokerage.

Weekly data from the U.S. Commodity Futures Trading Commission showed non-commercial traders widened their net short position in CBOT wheat in the week to Dec. 22 by about 17,000 lots, to 105,706 contracts, the fourth-largest net short in records dating to 2006.

Corn got a lift from wheat’s climb. CBOT March corn settled up 1-1/2 cents at $3.62-1/2 per bushel after dipping to $3.57, a contract low and the cheapest value since Nov. 10 on a continuous chart of front-month corn futures.

The corn market is anchored by bearish fundamentals, including ample world supplies and renewed export competition for Argentina, where the new government has scrapped grain export taxes.

In the U.S., farmers have been reluctant sellers of their 2015 corn harvest, opting to store much of it and hope for a price rally. But some analysts think grain might soon start to hit the market as U.S. growers seek cash to pay expenses in the new year.

“We know that farmer-owned supplies are very large, and that is an overall negative factor. A lot of farmers are going to have to pay input costs and taxes,” Vaclavik said.

Soybean futures rose on bargain hunting after a five-session slide. But gains were limited by forecasts for much-needed rainfall in Brazil’s top soy state, Mato Grosso.

“Forecasts are very reassuring to a market that had been getting concerned about dryness (in Brazil). Assuming the forecasts come to fruition, you won’t have that any more,” said Terry Linn of the Linn Group, a Chicago brokerage.

Julie Ingwersen is a Reuters correspondent covering grain markets from Chicago. Additional reporting for Reuters by Colin Packham and Sybille de La Hamaide.

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