Wheat futures shrugged off bearish fundamentals, soaring through technical resistance in a short covering rally.
Wheat prices have been lagging behind soybean and corn prices for weeks, weighed on by the massive scale of global stocks.
But the premium of wheat to corn narrowed, hitting barely 60 cents a bushel this week, funds appear to be pulling out of short wheat grain spreads.
“The market today is all about money flow,” said Kim Rugel, at Benson Quinn Commodities.
Ms Rugel early in the session suggested that the broaching of key technical resistance levels could “finally put the squeeze on the short funds”.
US rains
True, there was some fundamental support. Jennifer Webster, at CHS Hedging, noted “abundant rain and severe weather” in wheat growing areas across the US Midwest.
US Commodities suggested that “rains over the US Southern Plains are becoming a concern”.
Much of the US wheat crop is well served for moisture at the moment, and heavy rains would be a negative for yields and quality.
“Drums are beating about quality issues in the soft red winter and hard red winter wheat crop, said Tregg Cronin, at Halo Commodities, but suggested this was “seems secondary” to the “momentum of money entering our space”.
Bearish fundamentals
But other fundamental news was not supportive.
The International Grain Council upgraded its ideas of global wheat production by 5m tonnes, to 722m tonnes.
The revisions mean the market is now forecast to be in surplus, with supply outstripping demand by 6m tonnes.
Just two months ago the IGC saw the world wheat balance 3m tonnes in deficit in 2016-16.
The IGC saw raised its ideas of 2016-17 cereal ending stocks by 2m tonnes to a new all-time high of 474m tonnes.
Prospects for total cereal production were lifted by 10m tonnes month on month, to 2.015bn tonnes, up 1% year-on-year, and the second highest level on record.
Rising EU harvest ideas
The European Commission sharply lifted forecast for the soft wheat harvest in the European Union, by 2.3m tonnes to 145.1m tonnes.
But the Commission lowered its outlook for 2016-17 ending wheat stocks by 500,000 tonnes to 18.4m tones, due to expected higher exports, and a lower carry in from the previous season.
Russia-based analysts SovEcon lifted its forecast for Russia’s total grain crop by 1.6m tonnes, to 107m tonnes.
But the smaller stocks number, and the strength from Chicago, helped Paris wheat futures finish up 2.1%, at E167.75 a tonne.
Weak sales
And wheat export sales were hardly supportive.
For 2015-16 the USDA reported a net cancellation of 9,800 tonnes. Analysts were expecting export sales to come in at 0-200,000 tonnes.
Still, Joe Lardy at CHS Hedging said that the cancellations were “not surprising as we are right at the end of the marketing year”.
US export sales for 2015-16 are running at 97% of the USDA’s forecast for year, with just two weeks left in the marketing year.
New crop wheat sales were 345,500 tonnes, in line with market expectations.
Money flow
But appeared that be technical trading and money flow ruled the day, helped on by the weather worries.
July Chicago wheat finished up 3.4% at $4.81 ¼ a bushel, their highest level in for a week.
July Kansas wheat finished up 2.6%, at $4.62 ½ a bushel.
Profit taking
Weekly US soybean export sales for the current marketing year were in line with expectations, at 4556,900 tonnes, while new crop sales undershot market expectations, at 150,000 tonnes.
The total number of soybeans booked for export in 2015-16 now exceeds the official USDA forecast for exports in this marketing year, with months to go before the end of the season.
Old crop soymeal and soyoil exports were also strong.
But profit taking kicked in, after the front month contract hit fresh 17-month highs in overnight deals.
The July contract ended down 0.6% at 10.79 ¾ a bushel.
Strong corn sales, again
US corn sales beat expectations, at 1.4m tonnes for the current marketing year, where markets were looking for sales of 1.0-1.3m tonnes.
Export sales for the current marketing year an now 95% of the USDA forecast, and the old crop sales were the fourth highest of the year.
July corn futures finished up 1.0%, at 4.08 ¼ a bushel.
Sugar continues to surge
Raw sugar continued on its recent tear, helped by some fresh fundamental news as rainfall was forecast for the Brazilian cane belt next week, which could disrupt the harvest in the world’s top producer.
Nick Penney, at Sucden Financial, warned that Brazilian weather “is going to cease being normal for a while and seeing as this seasons expected large crush was predicated on normal weather conditions, it would follow that estimates could be lowered”.
“Rain disruptions will also be felt in the exporting ports,” he warned.
“These are already said to be suffering from bottlenecks caused by the competition of ships to load both sugar and grains, especially soybeans.”
July raw sugar settled up 1.5%, at 17.42 cents a pound, the highest level since the summer of 2014.
Cotton jumps up
The US cotton crop is being planted, and is vulnerable to weather disruption.
“Planting progress will turn slower now as showers and storms make their way through the Delta and Southeast,” said Jack Scoville, at Price futures group.
US weekly cotton export sales came in 128,000 running bales, while sales for the marketing year were 119,200 running bales.
July cotton futures settled at 64.33 cents a pound, up 2.3% on the day and a one-month high.
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