U.S. grains: Wheat rallies as investors cover shorts

CBOT May 2019 wheat with Bollinger bands, a gauge of market volatility. (Barchart)

Chicago | Reuters — U.S. wheat futures jumped 5.5 per cent on Tuesday, rebounding from contract lows on a round of technical buying and bargain hunting in an oversold market, traders said.

Corn and soybeans also were higher after recent declines, but their gains paled in comparison with wheat as traders unwound bearish positions despite signs of improving crop conditions in key growing areas.

“I see today’s price action more as a technical bounce, dead cat bounce, whatever you want to call it,” said Terry Linn, analyst with Chicago brokerage Linn + Associates. “You do have the European market up pretty hard. So it looks like world markets are just coming up for air.”

Chicago Board of Trade May soft red winter wheat futures were up 23-3/4 cents at $4.52-1/4 a bushel (all figures US$). The most-active contract posted its biggest daily percentage gain since a 6.4 per cent rally on July 25, 2018.

“Finally got the short squeeze we’ve been waiting all these many weeks as wheat exploded higher today,” Charlie Sernatinger, global head of grain futures at broker ED+F Man Capital in Chicago, said in a note to clients.

USDA said on Monday that good-to-excellent ratings for winter wheat in Kansas, the largest U.S. production state for the crop, rose two percentage points to 51 per cent in the latest week. Ratings also rose in Oklahoma but fell in Texas.

CBOT May corn was up 3-1/2 cents at $3.65-1/2 a bushel after dipping to a contract low during the overnight trading session.

CBOT May soybeans were 6-3/4 cents higher at $8.96-3/4 a bushel.

Chinese Vice Premier Liu He held a telephone call on Tuesday with U.S. Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer on key issues in their trade talks, state news agency Xinhua said.

The call follows a U.S. Agriculture Department announcement on Monday that U.S. exporters had arranged deals to ship 926,000 tonnes of soybeans to China during the 2018-19 marketing year.

“China has made large purchases of U.S. soybeans in past days, but the market wants a strategic agreement which would reopen China to U.S. soybean exports and is not very impressed by piecemeal sales,” said Matt Ammermann, commodity risk manager with INTL FCStone. “More details about a U.S./China trade deal is what the market wants.”

— Mark Weinraub is a Reuters commodities correspondent in Chicago; additional reporting by Julie Ingwersen in Chicago, Naveen Thukral in Singapore and Michael Hogan in Hamburg.

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