MGE wheat settles sharply higher

Spring wheat futures at the Minneapolis Grain Exchange settled sharply higher on Monday, rallying from Friday's declines on concerns about hot weather in the northern US Plains production belt, traders said.
MGE September spring wheat closed up 10-3/4 cents at $5.20-3/4 per bushel after reaching $5.23, one cent below its contract high. MGE December ended up 6-1/2 at $5.19-3/4.
Volume was estimated by the exchange at 8,283 contracts, down from 8,833 lots on Friday. Prudential bought 300 December contracts while J.P. Morgan bought 200 September and 200 December, traders said. ADM Investor Services and UBS Warburg each sold 500 to 700 December, they said.
Intermarket spreading was supportive, with traders buying Minneapolis wheat futures against Kansas City and Chicago, especially in the December 2006 and December 2007 contracts.
MGE September wheat traded at a premium to Kansas City September on Friday for the first time since January. The market remained fixated on ideas that hot and dry weather is reducing the yield potential of the US spring wheat crop, which is in its key reproductive phase.
After the markets closed, the USDA said 42 percent of US spring wheat crop was rated in good to excellent condition, a drop of 10 points from 52 percent the previous week. Traders had expected a drop of only about 1 to 3 points.
Forecasts showed no significant relief in sight for the crop. The Meteorlogix weather service predicted continued hot and mostly dry weather in the northern US Plains this week, with high temperatures in the mid- to upper 90s Fahrenheit by Thursday and Friday.
Given the weather concerns, traders shrugged off disappointing weekly export inspections. The USDA said Monday that 8.3 million bushels of wheat were inspected for export last week, below trade estimates for 12 million to 17 million.
The market was awaiting the USDA's July crop reports on Wednesday. The average estimate for US all-wheat production among analysts surveyed by Reuters was 1.820 billion bushels, up from USDA's June estimate of 1.814 billion. The average estimate for spring wheat production was 490 million bushels.
The average trade estimate for US new-crop wheat ending stocks was 443 million bushels, up from USDA's June figure of 416 million. The CFTC Commitments of Traders report issued Friday showed large speculators widened their heavy net long position in MGE futures in the week ended July 3.
There were no deliveries on the MGE July contract for Monday. In world news, Italy's soft wheat output has increased by some 3 percent this year to 3.4 million tonnes but durum wheat crops have fallen, according to leading farmers' group Coldiretti.