(Agrimoney) – Wheat futures rebounded, as Canadian stocks data and downbeat results from a Kansas crop tour led a more bullish turn in the newsflow, spurring short-covering among funds, which have bet heavily on price falls.
Chicago soft red winter wheat futures, the world benchmark, soared 3.2% at one point for July delivery, taking them to $4.81 ¼ a bushel, while Kansas City hard red winter wheat jumped 3.0% back above $5.00 a bushel.
In Paris, soft milling wheat for September bounced 1.5% from its seven-month closing low of the last session to end at E173.25 a tonne on Wednesday.
The gains follow the release of a series of less upbeat news on world wheat supplies, after the cut-price and plentiful tenders to an Egyptian tender which fuelled a drop in Chicago spot futures in the last session to a five-year low.
‘Finding some vulnerability’
Data from the second day of the Wheat Quality Council tour of Kansas, the top wheat-growing state, appeared to continue the worse-than-anticipated findings from Tuesday, when northern areas were estimated to have yield potential of 34.3 bushels per acre.
That figure, reflecting drought and winterkill damage to seedlings earlier in the growing season, was the worst day-one estimate for the tour in 14 years.
“It looks like what people are finding is that rainfall has helped the crop recover, but has not provided a cure,” said Don Roose, president of Iowa-based broker US Commodities.
ADM Investor Services noted that “crop scouts are finding some vulnerability to the Kansas wheat crop”.
Lower-than-expected stocks
Meanwhile, Statistics Canada data showed Canadian wheat inventories, as of the end of March, falling 25% year on year to 16.73m tonnes.
While still historically sizeable – above the 14.54m tonnes two years ago, before inventories were sent soaring by a bumper harvest – the figure was some 1.0m tonnes below trade expectations.
“Canada is still trying to get out from under the behemoth of a crop that it had two years ago,” Brian Henry, at Minneapolis-based Benson Quinn Commodities, told Agrimoney.com.
“But what the figure does show is that Canada’s stocks might by the end of the season get down to near normal levels, perhaps at 6m-6.5m tonnes.
“It means they need a crop again to replenish supplies, which wasn’t really the case last year,” he said, attributing the bigger-than-expected decline in inventories to extra use of wheat in animal feed.
‘Ran out of sellers’
Meanwhile, separately the European Commission cut its forecast for the European Union wheat inventories at the close of 2015-16 by 1.2m tonnes to 15.04m tonnes, reflecting an upgrade of 1.5m tonnes to 51.5m tonnes in the estimate for the amount of crop used in animal feed.
And US Department of Agriculture staff in New Delhi slashed 5.0m tonnes from their forecast for India’s rain-plagued wheat crop, meaning the country in 2015-16 looks set to lose its status as a net exporter of the grain.
The run of more bullish news comes at a time when hedge funds have run up a record net short in Chicago wheat futures and options of more than 100,000 contracts, as of last week.
“The negative factors for prices are still there,” Mr Henry said, noting factors including the cheap and plentiful offers of wheat to an Egyptian tender on Tuesday.
“But people have come to terms with a lot of this, and the market just seemed a bit stretched to the downside. It just ran out of sellers.”
‘Don’t get too carried away’
US Commodities’ Don Roose cautioned against viewing the rebound as the start of a long-term recovery in prices, given the extent of uipbeat crop hopes still in play.
“People shouldn’t get too carried away. There is a not a big bull story. It is more a matter of adjusting the technical balance.”
Chicago wheat for July stood 3.1% higher at $4.81 a bushel in late deals, when Kansas City wheat for July was 2.7% higher at $5.03 ¼ a bushel.
