Wheat price surge trips over hopes for US rain

Wheat prices touched fresh 10-month tops, coming within an ace of returning to $8 a bushel for higher protein supplies, as data showed mounting dryness in major US growing areas intensified although hopes for rain pull back futures from their highs.

Soft red winter wheat for May hit $7.23 a bushel in Chicago, the highest for a spot contract since late April last year, before retreating on profit-taking and ideas of rain ahead to $7.02 a bushel as of 11:45 local time (16:45 UK time), down 1.9% on the day.

Kansas City-traded hard red winter wheat, whose central southern Plains heartland is at the centre of dryness concerns, hit $7.99 a bushel for May delivery, also a 10-month high, before retreating to $7.79 a bushel, a loss of 1.1%.

The initial gains followed the release of weekly official data showing a further spread of dryness in southern wheat-growing states, leading a nudge higher by 1.8 points, to 37.5%, in the proportion of the US deemed in drought.

Weekly US export sales data, at 597,000 tonnes old crop and new combined, were also at the top end of market expectations.

Drought spreads

In Kansas, the top wheat-growing state, 84.0% of land was deemed in drought, up nearly 17 points week on week, and nearly twice the level at the start of 2014.

In Texas, another hard red winter wheat state, the proportion rose 1.4 points to 64.2% and in Nebraska by 12.0 points to 64.9%, although Colorado, at 21.6%, saw only a 0.2 point rise to 21.6%.

Drought retreated in the important growing state of Oklahoma, by 3.4 points, albeit to a still-elevated 77.3%.

"Dry weather continues in the hard red winter wheat areas," said US Commodities, adding that "little rain is forecast for the next two weeks in Kansas, Oklahoma, and Texas".

'Wetter forecast'

However, at RJ O'Brien, Richard Feltes took a less downbeat line, saying that the weather outlooks was "not quite as alarming as yesterday, with less severe cold in the 11-15 day forecast and a slightly wetter forecast for the northern half of the US hard red winter wheat belt in the 11-15 day timeframe".

And weather service MDA said that the Plains wheat belt was forecast "wetter Friday", if drier for Sunday.

"A few showers will favour south eastern Oklahoma on Friday, then build across eastern Oklahoma and eastern Texas Saturday," the weather service said.

In Australia, where dryness worries are also rising, ahead of winter wheat sowings, "rains should increase next week" too.

Export sales

Separately, the US Department of Agriculture revealed US export sales of wheat of 402,000 tonnes for this season and 195,000 tonnes for 2014-15.

Investors had expected 300,000-600,000 tonnes combined.

The data were "bullish to neutral for wheat", US Commodities said.

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