Wheat futures at the Chicago Board of Trade closed lower on Tuesday on profit-taking after worries about the US Plains wheat crop lifted the market to fresh highs early in the session, traders said.
CBOT wheat set contract and 3-1/2 year highs after the USDA lowered weekly crop ratings amid hot and dry weather in the US Plains. The Agriculture Department said 30 percent of the US winter wheat crop was rated in good to excellent condition, down from 36 percent the previous week.
Funds bought wheat on the open, traders said. But prices turned lower as follow-through buying failed to emerge.
"This market is heavy from a technical standpoint. We pretty well priced everything in the market, so people are looking at this and not seeing a lot of upside potential for the short term," Prudential Financial analyst Shawn McCambridge said.
CBOT July wheat settled 6-1/2 cents lower at $4.19-3/4 per bushel after climbing to $4.33 in early trade, above the previous high of $4.28. Deferred months ended down 2-1/2 to 6-1/2 cents.
Funds were net buyers of 2,000 contracts while locals were sellers, traders said. Trade was volatile, with the sharp moves in prices keeping brokers on edge.
Volume was heavy, estimated by the exchange at 67,988 futures and 17,991 options. That compared with 74,833 futures on Monday.
The nine-day relative strength index for July stood at 81 ahead of the open, falling to 74 by the close. Chartists view an RSI of 70 or higher as one indicator of an overbought market.
The CBOT reported open interest in wheat ahead of the open at a record 518,085 contracts, reflecting increased participation by funds.
Weak cash markets were bearish. Spot basis bids for soft red winter wheat fell sharply this week, reflecting weak demand from processors and exporters, and the approach of the Midwest harvest.
The US spring wheat crop was off to a good start. The USDA, in its first spring wheat crop ratings of the year, said 76 percent of the crop was rated good to excellent. That compared to 74 percent good/excellent a year ago.
Overnight exports were routine. South Korean flour millers tendered to buy 23,000 tonnes of US No 1 wheat, and Japan said it offered to buy 151,000 tonnes of US, Canadian and Australian wheat at its weekly Thursday tender.
In other news, the collapse of a $70 million wheat deal between Australia and Iraq could still yet lead to new sales being struck in tenders floated this month, Wheat Australia said.
Pakistan aims to export wheat for the first time in more than two years and will bid on tenders to sell grain to its long-time rival India, a Pakistani government official said.