U.S. grains: Wheat surges as funds cover short positions

Chicago | Reuters — U.S. wheat futures surged seven per cent on Thursday as a softer dollar inspired funds to cover short positions, analysts said.

Corn followed wheat higher, while soybeans closed flat after a private forecast for record-high U.S. soybean plantings.

At the Chicago Board of Trade, July wheat settled up 32-3/4 cents at $5.14-1/4 per bushel after reaching $5.15-1/4, its highest in a month (all figures US$).

July corn ended up 5-3/4 cents at $3.68 a bushel, while July soybeans fell 1/4 cent to $9.57 a bushel.

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The increase in wheat prices was the biggest daily move for the most active contract since June 2012. But analysts struggled to find a catalyst, other than that commodity funds held a massive net short position in CBOT wheat.

“Any news that is out there is basically an excuse. There has been some chatter about maybe some export business, but the larger thing is that we have built up record-large short positions,” said Arlan Suderman, market analyst with Water Street Solutions.

“Particularly with the dollar being weaker, you increase money flow into the broader commodity sector, and you start getting these fund managers saying ‘I am going to take some profits on my big short positions.'”

The dollar fell after a report that U.S. producer prices dropped in April, data that challenged hopes for stronger U.S. economic growth and supported the view that the Federal Reserve would delay increasing interest rates.

CBOT corn followed wheat higher, despite disappointing weekly U.S. corn export sales of 370,000 tonnes, a low for the current 2014-15 marketing year.

Soybeans sagged after private analytics firm Informa Economics projected U.S. 2015 soybean plantings at 87.2 million acres, a potential record high more than 2.5 million acres above the U.S. Department of Agriculture’s current forecast.

USDA this week forecast that U.S. 2015-16 soy ending stocks would reach 500 million bushels, the most in nine years, based on its plantings estimate of 84.6 million acres. Larger plantings could translate into even bigger stocks.

Global soy supplies are also ample. Argentina’s 2014-15 soy production will reach a record 59.6 million tonnes, the Rosario Grains Exchange said on Wednesday.

“There is strong (soybean) supply coming from South America and we are seeing demand for U.S. products slow down in Asia,” said Kaname Gokon, general manager of research at brokerage Okato Shoji in Tokyo.

Julie Ingwersen is a Reuters correspondent covering grain markets from Chicago. Additional reporting for Reuters by Nigel Hunt in London and Naveen Thukral in Singapore.

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