Wheat futures on the Chicago Board of Trade hit two-month highs on Thursday, buoyed by spill-over strength from the raging gold and crude oil markets, traders said.
US crude oil futures closed above $73 per barrel, while the benchmark June gold contract in New York hit $728, its highest prices since September 1980.
Wheat followed as corn and soyaoil futures staged a late-day surge on ideas the jump in energy markets would spur demand for biofuels.
"Everybody came in this morning and looked at their screens and saw crude oil up, and grains became a favourite," one CBOT wheat trader said.
Also, wheat was underpinned by a lack of selling ahead of key crop data from the US Department of Agriculture on Friday. Traders expect the government to project a decline in US and world wheat production for 2006/07.
CBOT July wheat settled 7-1/2 cents higher at $3.92 per bushel, hitting light buy-stops above $3.90, traders said. September ended up 7-3/4 at $4.04-1/2 and December was up 8-1/4 at $4.22-1/2.
Funds bought 4,000 to 5,000 contracts, traders said.
The spot May contract, which expires on Friday, settled up 5 cents at $3.82-1/2.
Volume was estimated by the exchange at 49,971 futures and 13,038 options. That compared to 70,036 futures on Wednesday.
Traders shrugged off ideas that wheat was technically overbought after rallying over the last week. The nine-day relative strength index for CBOT July stood at 73 ahead of the open and closed at 78, above the benchmark of 70 that chartists view as one sign of an overbought market.
Open interest stood at a record 425,482 contracts after Wednesday's close.
On the fundamental side, concerns about potential frost damage in the US Plains hard red winter wheat belt added support. The Meteorlogix weather service reported freezing temperatures overnight across north-west Kansas, south-west Nebraska and north-east Colorado.
"Any wheat heading in those areas probably saw some damage. The feeling is there was a little bit of damage to wheat in north-west Kansas. In Colorado it was definitely cold enough to damage wheat," Meteorlogix forecaster Mike Palmerino said.
Weekly export sales data was bullish. The USDA said export sales of US wheat last week totalled 413,800 tonnes (old and new crop combined), above estimates for 200,000 to 350,000 tonnes. However, the old-crop total of 33,100 tonnes was a marketing year low.
Japan bought 90,000 tonnes of wheat from the United States and Canada at its weekly tender. US FOB offers for HRW wheat firmed on optimism about sales to Iraq.
Australian Crop Forecasters, a private group, pegged Australia's 2006/07 wheat crop at 24.4 million tonnes, roughly the same as last year.
Traders were positioning ahead of Friday's USDA May supply/demand reports. The average analyst estimate for US 2006 winter wheat production was 1.373 billion bushels, down from 1.499 billion last year.
Analysts pegged old-crop US wheat ending stocks at 537 million bushels and new-crop stocks at 466 million.
Deliveries on the CBOT May contract were light at 34 lots with a USA Blue customer posting 28 and stopping 27. Registrations with the CBOT totalled 1,675 lots, unchanged from the previous day.