Forexpros – Wheat futures jumped to a three-week high on Wednesday, as an end-of-the-month short-covering rally continued ahead of the expiration of the front-month March contract.
On the Chicago Mercantile Exchange, wheat futures for March delivery traded at USD6.6700 a bushel during European morning trade, gaining 0.74%.
The March contract is due to expire at the end of trading on Wednesday, February 29. Contract expirations often lead to volatile sessions as market participants look to close out positions or readjust their portfolios.
Meanwhile, the more actively traded contract for May delivery advanced 0.53% to trade at USD6.7212 a bushel.
It earlier rose by as much as 0.64% to trade at USD6.7288 a bushel, the highest since February 2.
Wheat prices surged nearly 3% on Tuesday as hedge funds and large institutional investors covered short positions, or bets that prices will fall, a move known as short covering.
The March contract has gained almost 7.5% since dropping to a one-month low on February 16 in the run-up to the U.S. Department of Agriculture’s annual Outlook Forum last week.
The USDA last week forecast U.S. wheat plantings would increase to 58 million acres, up more than 6% from last year when flooding curtailed spring wheat planting in the U.S. northern Plains.
According to the agency, total U.S. wheat output was forecast to rise by 45 million bushels from a previous estimate to 2.165 billion bushels, an 8.3% increase from a year earlier.
Meanwhile, investors continued to monitor global crop conditions of the grain. In the U.S., crop-friendly snow and moisture fell over the weekend and more snow is expected this week in the dry areas of the U.S. Northern Plains, helping to buoy prospects for spring seedings.
Elsewhere, industry weather group Telvent DTN said that dry weather in Kazakhstan may persist and threaten planting in the second-largest wheat exporter in the former Soviet Union.
The country, estimated by the USDA to more than double its harvest and raise exports to an all-time high in 2011-12 season, will continue to suffer from dry weather with temperatures warming to above normal in March through May.
Countries in the Black Sea region are major wheat exporters and compete with the U.S. for business on the global market. Downbeat crop prospects could boost demand for U.S. supplies.
The U.S. is the world’s third largest wheat producer and biggest exporter of the grain
Meanwhile, in broader market news, the European Central Bank allotted EUR530 billion to 800 European lenders in its second offer of unlimited three-year loans earlier in the day.
Market expectations for the size of the operation were in a range of EUR200 billion to as high as EUR1 trillion.
The ECB’s first liquidity operation in late December totaled EUR489 billion, with only 523 banks participating.
Elsewhere on the Chicago Mercantile Exchange, corn for May delivery added 0.13% to trade at USD6.5788 a bushel, while soybeans for May delivery traded at USD13.1363 a bushel, easing up 0.1%.
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