Winter wheat futures
took over from spring wheat in
leading the rally in the complex, jumping to three month highs, amid talk of fund
buying fuelled by worries over weather setbacks to crops in the US and
Chicago-traded soft red winter wheat, the world's bellwether
wheat contract, soared 2.9% to $4.53 ¾ a bushel – a four-month closing high for
a spot contract, and within an ace of a one-year top.
The gains far outpaced a 0.8% rise to $6.32 ½ a bushel in July
high protein hard red spring wheat, as traded in Minneapolis and grown in the
northern US Plains, which has been the epicentre of worries over the impact of
drought in the likes of North Dakota and South Dakota.
The outperformance of Chicago wheat, which is being
harvested in the US Midwest, and not seen in danger of weather losses, was
viewed as evidence of speculators using the contract as a means of gaining exposure
to broader recovery in wheat prices.
After overnight selling on the electronic market "dried up,
bulls came back in", said Terry Reilly at Chicago broker Futures International,
adding that they appeared to be encouraged by the "deterioration in" the spring
"The fact that the buying is in Chicago is an indication
that maybe some of the funds have started to buy into the story," with Chicago
the world's most liquid wheat contract, and so favoured by speculators.
"There might also be an aspect of money flow, with investors
moving out of equities, and with the US dryness representing one of the
best-known stories in commodities right now," Mr Reilly told Agrimoney.com.
'Continue to stress
Buying was also encouraged by weather worries outside the
US, said Richard Feltes at RJ O'Brien, noting "concern over eroding European
Union and Ukraine crops".
Weather service MDA said that "dryness will continue to
stress wheat in central and eastern Ukraine wheat areas" for the next few days.
While in the six-to-10 day outlook showers in western
Ukraine will improve moisture a bit for wheat growth… notable dryness will
maintain stress on wheat across southern Belarus, central and eastern Ukraine, [Russia's]
southern Central Region, and central North Caucasus".
'Taken a toll'
In the EU, Strategie Grains cut its forecast for the bloc's
soft wheat harvest this year by 1.1, tonnes to 141.6m tonnes, although that
would still be 5.5m tonnes above last year's rain-affected crop.
"Whilst it is too early to describe a situation of drought
stress at this stage, the dry conditions have certainly already taken a toll on
ear cereal yield potentials," the influential analysis group said, cutting estimates
in particular for French, German and Spanish crops.
And Agritel cautioned over further testing weather ahead,
saying that crop condition "will have to be closely monitored in the perspective
of another heatwave forecast for next week".
MDA said that "the continued dry and warm pattern in Italy,
Spain, and France through early next week will allow moisture to decline and
stress to build on corn and sunflowers".
Paris wheat for December rose 0.7% to E174.75 a tonne, a
two-month closing high.
Furthermore, dryness is growing as an issue in Australia too,
although yet early in the growing season, with Lanworth flagging "record low"
soil moisture levels in Western Australia, the country's top wheat-growing state.
In fact, in the US itself, the weekly drought monitor showed
some retreat in dryness in North Dakota and South Dakota, where the proportion
of the state rated in drought eased by 4.5 points to 83.4%, and by 5.4 points
to 45.1% respectively.
That said, to the west, the proportion of Montana in drought
rose by 4 points to 20.6%, and to the east, the figure for Minnesota, where
spring wheat condition has bucked the negative trend so far, added 2.3 points
Still, "despite poor export sales and some rain coverage in
the Dakotas, wheat is finding strength in the prospect of continued dry weather
in most of the Dakotas and eastern Montana," CHS Hedging said.
By contrast, cotton
futures tumbled in New York, where the best-traded December lot closed down 2.1%
at 69.47 cents a pound, falling through another price floor, at the
psychologically important 70-cents-a-pound mark, to record its weakest finish
The drop followed some mixed US export data, with shipments
of 246,000 running bales (including pima cotton) last week not bad, if down a
little on the figure for the week before.
Export sales of 197,600 running bales for 2017-18, which
starts in August, were termed "outstanding" by Louis Rose at Rose Commodity
However, with export sales for this season falling 16% week
on week to a soft 73,000 running bales, including pima, "the current level of
old crop commitments continues to suggest that the USDA's export projection"
for US cotton in 2016-17 "is too high".
Indeed, the 14.5m-bale figure may be 300,000-500,000 bales
too large, Mr Rose said.
He also noted that certified stocks of cotton for delivery
against New York futures "continue to accrue and now stand at nearly 473,000
bales, which is bearish".
Stocks started 2017 at a little over 40,000 bales.