Wheat futures on the Chicago Board of Trade soared nearly 4 percent on Wednesday as technical buying and short-covering ignited a rally in a shortened session ahead of the US Thanksgiving Day holiday, traders and analysts said.
Talk of more export demand from Pakistan and India factored into the wheat rally, along with a drop in the US dollar. The front three CBoT wheat contracts closed up the daily limit of 30 cents a bushel in volatile trade, with spot December rising above $8 for the first time in two weeks.
"This is the nature of holiday markets," Prudential Financial grains analyst Shawn McCambridge said. "It's most likely very thin down there on the floor, and thinly traded markets tend to be vulnerable to increased volatility and wide price swings. That's what we've got today."
The CBoT closed early at noon CST (1800 GMT) on Wednesday ahead of the holiday on Thursday. Trade will resume with the Thursday night electronic session. CBoT December wheat settled up its 30-cent limit at $8.03-1/2, a two-week high. The contract blew past resistance at its 20-day moving average of $7.81.
Most-active March wheat settled up 30 cents at $8.26. The contract traded synthetically through wheat options at $8.34 to $8.36 at the close, traders said, implying it would open 8 to 10 cents higher when trade resumes Thursday night.
Several new-crop months hit contract highs, including July 2008 which reached $7.11. Funds bought 5,000 wheat contracts, traders said. Volume was estimated by the CBOT at 107,854 wheat futures and 17,160 options.
From a technical perspective, Prudential's McCambridge said, CBOT wheat became oversold after prices tumbled more than $2 a bushel from the all-time high set in late September at $9.66-1/2 amid a global supply squeeze. Commodity funds expanded their net short position in CBOT wheat over the last few weeks, leaving the market open to short-covering.
Wheat futures closed limit-up in Kansas City and Minneapolis as well. Kansas City Board of Trade December wheat rose 30 cents to settle at $8.30-1/4 per bushel and Minneapolis Grain Exchange December spring wheat ended up 30 cents at $8.88.
On the export front, two Indian state-run trading firms may float wheat import tenders within the next three weeks, a government official in New Delhi said. Also, rumours persisted that Pakistan would seek more wheat, possibly tendering for 200,000 tonnes next week, CBoT floor traders said.
Concerns about dry weather in the US Plains winter wheat belt added support. The region's hard red winter wheat crop needs moisture to boost growth ahead of winter dormancy, but storms late this week were forecast to produce only 0.1 to 0.25 inch of rain in far southern areas, offering little relief, DTN Meteorlogix said.