US wheat futures rose over 5 percent on Friday and posted the biggest monthly percentage gain since at least 1959 as drought decimated the crop in dominant global supplier Russia. The gains in wheat boosted corn and soyabean futures for a third straight day and roughly 10 percent for the month, even as favourable weather in the US Midwest buoyed crop prospects.
Wheat futures at the Chicago Board of Trade (CBOT) gained 42 percent in July, were up 55 percent from the lows in June and exceeded a 38 percent gain in 1964, according to records going back to 1959 from the Commodity Trend Service, a private charting firm.
The spot wheat contract was up 34 cents at $6.61-1/2 per bushel at the close of trading on Friday. Investor funds bought an estimated 16,000 CBOT wheat futures contracts, 80 million bushels or 3.6 percent of this year's estimated US wheat production of 2.216 billion bushels.
Managed funds have reduced their net short position in wheat for the past six weeks and could even become net long the commodity for the first time since April 2008 if the trend continues. CBOT soyabeans jumped to a 6-1/2 month high and corn to a near two-week peak, following the surging wheat market. September corn was up 13-1/2 cents at $3.92-3/4 and August soya was up 25-3/4 cents at $10.52-1/2.
Funds bought 18,000 corn futures contracts and 6,000 soya. November new-crop soya rose above $10 per bushel for the first time since January 11. "The market has upside momentum now and no one wants to stand in front of it. I think the wheat market is overstated and way ahead of itself but the market will keep going up until fund buying subsides or until some numbers come out of Russia that would stall the buying," said Shawn McCambridge, analyst for Prudential Bache Commodities.
Markets were responding to the worst drought in Russia in decades and brought back memories to veteran grain traders of a huge US export program to that part of the world nearly 40 years ago. A crop disaster in the former Soviet Union in 1972 triggered a massive wheat buying program from the United States by Soviet government grain buyers, boosting CBOT wheat futures sharply higher through the following year. "They swooped in and bought and no one, except the grain companies selling, knew what was going on...everyone was caught flat-footed," McCambridge said.