Wheat rise on short covering and weather woes, but fundamentals still lacking

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Key points:

• Wheat futures in Chicago surged to a two-month high on Wednesday, driven by adverse weather across key growing regions forcing speculators to cover short bets
• Despite wet weather delays to the harvest delays, early crop quality and yields have exceeded expectations, suggesting no immediate threat to overall production
• So far, the main bid has come from funds reducing bearish exposure. Hedge funds have maintained a net short in CBOT wheat for three consecutive years, and in Kansas HRW since August 2023

Wheat futures in Chicago surged to a two-month high on Wednesday, driven by adverse weather across key growing regions in the U.S., Europe, and Russia, alongside signs of robust export demand—particularly into North Africa. The rally, which comes ahead of the U.S. holiday, has been amplified by hedge funds reducing long-held short positions in both CBOT and Kansas HRW contracts.

Images of combine harvesters stuck in muddy fields underscore the slow start to the U.S. winter wheat harvest. Persistent rains across the southern Plains—especially in Oklahoma and Kansas—have delayed progress. In Oklahoma, just 5% of the crop had been harvested by early June, down sharply from 44% last year and well below the five-year average of 23%. Nationwide, only 10% of the winter wheat crop has been harvested—the slowest pace since 2019—compared with the seasonal norm around 18%, according to USDA.

Despite the harvest delays, early crop quality and yields have exceeded expectations. The USDA this week also lifted its spring wheat condition rating to 57% good or excellent, up from 53%, suggesting no immediate threat to overall production.

On the charts, the most traded September and December CBOT wheat contracts have approached key trendline resistance, at USD 5.94 and USD 6.19 respectively, with last trades at USD 5.905 and USD 6.12.