Soft red winter wheat futures at the Chicago Board of Trade closed higher on Tuesday, rallying from early declines on a weather-related surge in the corn market, traders said. "We were definitely a follower today," one wheat trader said.
July wheat closed up 5-1/2 cents at $5.02 per bushel, breaking through resistance at its 20-day moving average of $4.98-1/4. September ended up 5-1/2 at $5.15 with December up 5-1/4 at $5.22. Funds bought 2,000 contracts, traders said.
Volume was on the light side, estimated by the CBOT at 51,753 wheat futures and 15,045 options. New-crop December corn settled up 7-1/2 cents at $3.78-1/2. Concern about drought in China's wheat belt added background support. Chinese state media said a spring drought is intensifying across north China, including Henan province, the country's bread basket, where rainfall since March has been down 70 percent on the average for the last two years.
A wheat shortfall in China could further tighten world wheat stocks. The US Department of Agriculture last week projected global wheat ending stocks for 2007/08 at 113.3 million tonnes, a 26-year low.
Despite the higher close, CBOT wheat lost ground to Kansas City Board of Trade hard red winter wheat as inter-market spreads began to correct. In a market aberration, CBOT wheat has been trading at a premium to Kansas City wheat for the past month. Rumours circulated about Iraq seeking wheat, floor traders said. The talk may have helped KCBT wheat gain on CBOT wheat, as Iraq typically buys hard wheat.
Wheat futures were under pressure early in the session from improved US winter wheat crop ratings, traders said. The USDA late Monday said 58 percent of the US winter wheat crop was rated in good to excellent condition, up from 57 percent a week ago. A quick pace of US spring wheat planting added to the early pressure. USDA said 87 percent of the crop was seeded by Sunday, ahead of the five-year average of 74 percent. On the export front, Japan said it would seek 130,000 tonnes of US, Canadian and Australian wheat at its weekly tender.
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