US wheat futures closed higher on Tuesday, following as crude oil and other commodity markets rallied in a reversal from Monday's fund-driven sell-off, traders said. Tight global stocks of old-crop wheat and several pending tenders from buyers including Tunisia, Turkey and Morocco helped underpin values.
Jordan bought 100,000 tonnes hard wheat, likely from the Black Sea region or Kazakhstan. After the close of US markets, Egypt said it was seeking wheat.
However, rumours that Iraq may have bought only Canadian wheat at its latest tender pressured the market at times, especially hard red winter wheat futures at the Kansas City Board of Trade.
At the Chicago Board of Trade, wheat surged to the day's highs near the close in thin trade. CBOT May wheat settled up 32-1/2 cents, nearly 3 percent, at $11.64 per bushel. New-crop July was up 36 cents at $11.38, with back months up 20 to 57 cents.
Funds bought 3,000 contracts, CBOT traders said. At the KCBT, May HRW wheat ended up 13 cents at $12.13 a bushel, after tumbling as low as $11.77-1/2. At the Minneapolis Grain Exchange, May spring wheat closed up 20 cents at $14.10. All three exchanges were trading with expanded 90-cent daily limits in wheat futures.
Grains drew support from expectations that the US dollar would remain weak amid low interest rates. The US Federal Reserve cut a key interest rate by three-quarters of a point, just as US grain futures markets were closing.
However, the dollar rallied after the Fed's announcement because the cut was smaller than the one-point cut that some had expected. Still, relative weakness in the dollar has helped keep US grains competitive on the export market. "Overall, it's generally bullish for our commodity markets because we will probably see a pickup in export demand," said Terry Reilly, an analyst with Citigroup in Chicago.
Weather conditions in the southern US Plains wheat belt were improving following recent storms, although some areas remained dry. From 0.5 to 1.5 inches of precipitation fell across central Kansas, southern Oklahoma and central Texas since Monday morning. That followed good weekend rains, and the same area was likely to pick up another 0.1 to 0.5 inch of rain Tuesday.
"The eastern areas are doing really well - the central areas of Texas, Oklahoma and Kansas. It's the western areas that continue to get short-changed," said Mike Palmerino of DTN Meteorlogix. Daily trading volume in CBOT wheat was estimated on Tuesday at 56,990 futures, compared with 58,047 lots on Monday. At the KCBT, volume was estimated at 9,350 contracts, up from 6,425 lots on Monday. Spring wheat volume in Minneapolis was light on Tuesday at an estimated 4,197 contracts.