Wheat futures on the Chicago Board of Trade settled higher on Thursday, bucking a broader sell-off in commodities on a mix of bullish factors, including possible frost damage to Argentina's wheat crop, traders said.
The wheat market was also seen as oversold, while inter-market spreading against corn and a jump in Minneapolis spring wheat added further support. CBOT December wheat settled up 13 cents, or 1.7 percent, at $7.65-1/2 per bushel. New-crop July ended up 5-1/2 cents at $6.78, losing ground to old-crop December in a reversal of the recent trend.
Commodity funds bought 3,000 contracts, traders said. Volume was estimated by the CBOT at 114,011 wheat futures and 22,263 options. The cold spell in Argentina gave the market an early lift. Temperatures fell to 27 to 31 degrees Fahrenheit early Thursday in parts of southern Buenos Aires province, the country's key wheat area, where the crop is not yet mature.
"I would guess it was 10 to 15 percent of the wheat belt that may have taken some patchy damage," said Joel Widenor, manager of CropCast Services. "It wasn't a large geographic area, but the wheat is very concentrated around there."
It was too soon to tell whether the Argentine crop lost yield potential, but US traders said the frost gave a reason for CBOT wheat to rebound after a steady, seven-week decline. The December contract fell more than $2.20 a bushel after hitting an all-time high for a spot month at $9.61-3/4 in late September amid global supply worries.
The pullback to $7.40-3/4 as of Wednesday reflected a slowdown in export demand and better definition of global wheat supplies. But traders said the declines were overdone, setting the stage for Thursday's bounce.
"The Southern Hemisphere crop was going to come off and pound the market. Now we've got some cold temperatures, and the uncertainty was enough to inspire some short-covering and outright buying," one CBOT floor trader said.
Wheat also benefited from the weakness in other commodity markets as traders exited inter-market spreads involving wheat as the short leg. Traders were unwinding long corn/short wheat spreads, for example, by buying wheat and selling corn. Spring wheat futures at the Minneapolis Grain Exchange led wheat's climb, with December spring wheat rising 16 cents to close at $8.34.
"It started with bull-spreading in Minneapolis by the commercials, mainly because the cash market is firm," Fortis Clearing Americas analyst Charlie Sernatinger said.
The spring wheat cash market has been tight for several weeks, supporting nearby MGE futures. Domestic flour mills have been aggressive bidders for spring wheat due to railroad delays, along with a slowdown in country wheat offerings as farmers in the northern US Plains wrap up the corn harvest. Export business was routine overnight, with Japan buying 155,000 tonnes of wheat from the United States, Australia and Canada in its regular weekly tender.
Traders were awaiting USDA's weekly export sales report on Friday, one day later than normal due to the government holiday this week. Traders estimated US wheat sales at 250,000 to 400,000 tonnes. Dry areas of the southern US Plains wheat belt could get moisture next week but amounts will be light and temperatures will drop, forecaster DTN Meteorlogix said.
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