Wheat Rises, Extending Rally, as Dry Weather May Hurt EU, Russian Crops
Wheat rose, extending a rally to the highest price in almost six months, as dry weather in countries near the Black Sea and in Western Europe may curb output.
A drought is intensifying in Russia’s Volga District and in Kazakhstan, according to Accuweather.com. Dry weather in France, the European Union’s biggest wheat grower, also may curb production. Some hedge-fund managers and other speculative investors may have bought back bets that prices would fall and liquidated positions.
“We’re starting to see more and more concern about the weather in Russia and Europe,” said Frank Cholly, a senior market strategist at Chicago brokerage Lind-Waldock. “Those factors are going to let the market continue higher. We still have a lot of shorts to cover.”
Wheat futures for September delivery climbed 18 cents, or 3.4 percent, to $5.485 a bushel on the Chicago Board of Trade. The price earlier touched $5.495 a bushel, the highest level since Jan. 12.
Wheat has jumped 20 percent since June 29, the last time the most-active contract declined. It also has gained for six straight sessions, the longest winning streak since mid- November.
Milling wheat for November delivery traded on NYSE Liffe in Paris rose for an eighth day, the longest string of advances since the contract started trading in March 2009, and is at the highest level since June 2009.
Short Covering
Russia is the world’s second-biggest exporter of wheat, behind the U.S., according to the International Grains Council. Canada is the third-largest, followed by Australia, Ukraine and Kazakhstan, IGC data show.
Speculative short positions, or bets that prices would fall, outnumbered long positions by 47,119 contracts on the CBOT as of June 29, the Commodity Futures Trading Commission said last week. As the price rose, some investors who were short may have liquidated positions to avoid losses.
The grain harvest in Ukraine has been slowed by rains, UkrAgroConsult said yesterday. The precipitation also has lowered gluten levels in wheat, making the grain better suited as animal feed than for milling into flour, said Liza Malyshko, an analyst at the Kiev-based researcher.
Crops in Canada were hit by rain, hail and tornadoes last week, the Canadian Wheat Board said. Grain in Saskatchewan, the biggest grain-growing province, is showing signs of “distress” because of excessive rainfall the past three months, the provincial ministry of agriculture said.
Wheat is the fourth-biggest U.S. crop, valued at $10.6 billion in 2009, behind corn, soybeans and hay, government data show.
To contact the reporter on this story: Tony C. Dreibus in Chicago at tdreibus@bloomberg.net.
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