Remember when a 20c/bu rally in wheat was a frost event, widespread rain at harvest, a critical data correction in a USDA report, a huge export order from a buyer like China. Well welcome to the world of 20c rallies in wheat due to technical buying. Yep, the wires are suggesting last night’s rally in wheat futures is simply short covering after the funds had pushed the market too low.
Sure there was some fundamental speculation associated with the move mainly talk of slower Russian exports for March but we’ve been digesting this assumption for months now. We all know that the Russian wheat exports had to slow unless they were happy to make bread out of feed wheat.
It does raise the question of why did the market push so low then. Is its simply a matter of the funds producing more profit the further they can push a market away from its underlying fundamentals. If they can push a market 30c lower of higher than “where it should be” does it basically offer the managers the ability to pick up that difference on the turnaround.
Even the Platts Aussie FOB wheat contract at the CME found some upside closing US$4.25 higher at US$264.75 higher in the March and at US$266.50 in the June. Compared to the ASX June futures contract at an equivalent of roughly US$283.
Spot cash prices around the world did not reflect the rally in futures. In fact Russian milling wheat was actually back a few dollars per tonne on the day. US cash wheat offers did try and push higher with Gulf number up about US$5.00. Interesting to note the grade of US wheat that did see the biggest move in the cash side of the market was white wheat out of the Pacific Northwest.