Wheat futures rose to a four-month high on mounting concern that adverse weather across Europe will reduce production.
Russia will harvest 85 million metric tons this year, 5.6 percent less than forecast, because of heat and drought, the farm ministry said yesterday. Dryness in France, Germany and the U.K. also may also hurt output, Martell Crop Projections said. Some speculators unwound bets on falling prices.
“This is mostly short-covering,” said Jamey Kohake, a broker at Paragon Investments in Silver Lake, Kansas. “There isn’t a lot of out-and-out buying.”
Wheat futures for September delivery rose 4.5 cents, or 0.9 percent, to $5.075 a bushel on the Chicago Board of Trade. Earlier, the most-active contracted reached $5.26, the highest level since March 1. The price has jumped four straight sessions, gaining 11 percent since June 29.
Net-short positions, or bets on falling prices, have outnumbered long positions since June 2009. In the week ended June 29, net-shorts dropped 3.6 percent to 47,119 contracts from a week earlier, government data show. In February, net-shorts reached a record 60,547 contracts as global grain inventories climbed.
“We’re seeing continuation of some good technical buying,” said Tom Leffler, the owner of Leffler Commodities LLC in Augusta, Kansas. “The funds are covering their shorts.”
The rally is a good chance for farmers to sell wheat to elevators, and a chance for investors who had bet prices would rise to liquidate positions, Leffler said.
“I’d say they need to be careful about getting too greedy,” Leffler said. “I told them they’ve got to take advantage of this. This rally is offering some opportunity because the appreciation in futures pulls their cash price up.”
Wheat is the fourth-biggest U.S. crop, valued at $10.6 billion in 2009, behind corn, soybeans and hay, government data show.