Where does the spring wheat rally go from here?

The Minneapolis Grain Exchange shattered its daily trade volume record on Tuesday, as traders responded to dry conditions and lower-than-expected crop ratings for U.S. spring wheat.

MGEX reported 33,453 contracts traded on Tuesday — a 23 percent increase over its previous record of just over 27,000 in a day. The September spring wheat futures contract also rose 28 1/4 cents on the day.

“Poor crop conditions in key Hard Red Spring Wheat growing regions have been a
factor in the increased activity at MGEX,” said MGEX CEO Mark G. Bagan, in a statement. “Producers are bearing the brunt of the drought and bad weather. In times of great uncertainty, hedging with MGEX futures and options products continues to grow…”

Spring wheat futures have been rallying for the better part of the last month, due to a combination of factors, including the dryness in the northern U.S. and southern parts of Western Canada, as well as concerns about low supplies of high protein wheat with below average protein in the hard red winter crop.

After continuing to rally early on Wednesday, the market finally took a breath, and the September contract ended the day unchanged.

“I’m surprised the rally is holding up as well as it is because they have had pretty good rains across the Northern Plains and in parts of Canada as well, and crop conditions in the spring wheat belt in the U.S. should be much improved over the next few weeks,” notes Ken Ball of PI Financial in the interview below.

Having attracted plenty of outside attention, he says much of the buying in spring wheat futures over the last few days has likely been speculative in nature as opposed to commercial buying.

“There’s been massive spread trading going on between Minneapolis and Chicago, and Minneapolis and Kansas City,” he says. “A lot of it is speculatively driven…”

Ball joined us on Wednesday to discuss whether there’s room for the spring wheat rally to continue, protein spreads, and unseeded acres in more northern parts of Saskatchewan and Alberta:

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