Soft red winter wheat futures at the Chicago Board of Trade staged a sharp rally on Wednesday on US supply concerns, with nearby months at times rising the 30-cent daily trading limit, traders said.
CBoT July wheat settled up 24 cents, or 4 percent, at $6.05 per bushel, after reaching $6.11. Back months ended up 7 to 22 cents, with December up 22 at $6.23-1/2. Funds bought 6,000 contracts, traders said. Volume was heavy, estimated by the CBoT at 108,108 wheat futures and 13,668 options.
The wheat market has been volatile since the US Agriculture Department last week projected that global wheat supplies would drop to 112.03 million tonnes by the end of the 2007/08 marketing year, a 30-year low. That factor helped drive CBoT wheat to 11-year highs last week.
Weather issues in the US Plains have kept wheat futures on the boil, and helped the market to rally back from a steep profit-taking setback on Tuesday. Showers soaked the Southern Plains on Tuesday, generating 0.5 inch to 2 inches of rain in areas that were already saturated.
"This rally is all on the damage to wheat," said Roy Huckabay, an analyst with the Linn Group in Chicago. "The guys I talk to in hard wheat country are very concerned with what they're seeing. We have people in Oklahoma that tell us that a third of their acres will never see a combine. It's been raining on them for almost three weeks straight," he said.
Signs of rising demand for US wheat on the world market also helped lift futures. Iraq sought to import 350,000 tonnes of wheat flour in a move to help ease shortages while talks to buy large shipments of wheat were stalled.
"Iraq is bidding for flour. That tells you they are down to fumes on wheat coverage," Fortis Clearing Americas analyst Charlie Sernatinger said. Egypt, another key wheat buyer, approved 2 billion Egyptian pounds ($351 million) in extra spending by the country's main wheat buyer, the General Authority for Supply Commodities, due to high global commodity prices.
Meanwhile, Ukraine, hit by a severe drought, imposed a prohibitive 3,000-tonne export quota on wheat, as well as other grains, for a three-month period starting July 1. South Korea was seeking 42,700 tonnes of US wheat, and Taiwan sealed a deal to buy 89,910 tonnes of US wheat. On a bearish note, Iran will start exporting wheat soon, with the delivery of 200,000 tonnes from a north-western province to neighbouring countries, a regional official said.