Wheat futures at the Chicago Board of Trade soared on Thursday, closing nearly 5 percent higher as concerns about dry weather in Europe and a surge in corn futures ignited speculative buying, traders said. Nearby wheat contracts climbed the maximum daily limit of 30 cents per bushel before backing off a bit by the close, and new-crop months hit contract highs.
Commodity funds bought 8,000 to 10,000 contracts, traders said. CBOT May wheat settled up 22-3/4 cents, or 4.7 percent, at $5.06-1/4 per bushel after reaching $5.13-1/2, up the 30-cent limit.
Most-active July closed up 23 cents at $5.20-1/2 after reaching $5.27-1/2, above its previous contract high of $5.25. The contract traded synthetically through wheat options as high as $5.34, traders said. December wheat ended 18-1/2 cents higher at $5.32 after hitting a contract high at $5.43-1/2.
Volume was heavy, estimated by the CBOT at 103,889 wheat futures and 27,493 options. The rally was foreshadowed by a surge in French wheat futures earlier on Wednesday. New-crop months hit contract highs in Paris on fears that prolonged dry weather in western Europe and the Black Sea region could damage this summer's harvest.
Those concerns spilled into the US markets. "It's the weather that is the primary source," Iowa Grain analyst Gavin Maguire said of the CBOT rally. "It has to be said, though, that this wheat move got a lot of extra fuel from the technicals. Look at a July wheat chart - the way it has suddenly turned higher in recent weeks has really put it on the radar of a good number of chart-tracking funds."
Lingering concerns about freeze-related damage to the US winter wheat crop added support, and there was talk of fresh demand for soft red winter wheat from flour mills in the Southeast.
"Some of these small-producing states in the Southeast are finding a lot of wheat that is not going to make (grain)," said Roy Huckabay with the Linn Group in Chicago. That the USDA's weekly crop conditions report on Monday showed 21 percent of the US winter wheat crop in poor to very poor condition, up from 17 percent the previous week. Some of that wheat acreage may be torn up and planted with other crops.
Outside of Europe, weather forecasts had a bearish slant. Showers and cool weather in the US Plains this week favour development of the hard red winter wheat crop, forecaster DTN Meteorlogix said. In Australia, a key wheat producer, a chance for showers over the next several days should help replenish soil moisture ahead of planting, DTN Meteorlogix said.
South Korea was seeking 22,400 tonnes of US wheat in a tender that closes Thursday. Export business has been quiet this week. About 2,500 tonnes of wheat from Pakistan have reached India, flour millers said. Indian grain traders have contracted to import 20,000 tonnes of Pakistani wheat and may import up to 150,000 tonnes.