GRAINS-US wheat surges 4% on short-covering, lifting corn and soy

By Julie Ingwersen

CHICAGO, June 18 (Reuters) - Benchmark Chicago Board of Trade wheat futures jumped more than 4% on Wednesday as weather woes in parts of the United States and Europe, coupled with signs of fresh global export business, prompted speculators to cover short positions, brokers said.

Corn and soybean futures followed the higher trend ahead of a U.S. government holiday on Thursday. A setback in the dollar .DXY lent support, making U.S. grains more attractive to those holding other currencies.

As of 12:59 p.m. CDT (1759 GMT), CBOT July wheat WN25 was up 24 cents at $5.73 per bushel after reaching $5.74-1/2, the contract's highest price since March 24. CBOT July soybeans SN25 were up 3/4 cent at $10.74-3/4 a bushel and July corn was up 1 cent at $4.32-1/2 a bushel.

Wheat posted the biggest advances. Commodity funds hold a hefty net short position in CBOT wheat futures, leaving the market vulnerable to short-covering rallies, analysts said.

"Anybody that sold Chicago wheat in the last couple of months -- is under water. So short-covering is the big thing," said Terry Linn, analyst with Linn & Associates in Chicago.

He noted that Algeria booked more than half a million metric tons of wheat in a tender this week, according to European traders. In addition, the U.S. winter wheat harvest is off to a slow start due to wet conditions, while parts of Russia and the European Union have been dry. "These are adding together and help the charts get up and take out recent highs," Linn said.

Soybean futures inched higher while soyoil futures BOv1 were little changed, consolidating after a spike last Friday tied to larger-than-expected proposed U.S. biofuel mandates. The implied increase in domestic demand for soyoil has muted some of the concern about a slowdown in U.S. soybean exports due to trade tensions with China, the world's biggest soybean customer.

"Having this domestic demand mandated is a huge relief, and it changes the fundamental complexion of the (soybean) balance sheet," Linn said.

Corn futures rose along with wheat, but the most-active July contract CN25 trailed the gains in deferred contracts, reflecting easing concerns about tight supplies of last year's U.S. corn harvest and rising competition for export business, which has been a mainstay for U.S. corn futures.

"Even though corn demand has been good so far, you just haven't had any additional demand develop. And at the same time, Brazil brought home a massive crop. And that is going to be competing with us here for a while," Linn said.

Traders await market direction from the USDA's weekly export sales report, which will be released on Friday, a day later than usual, due to the U.S. Juneteenth holiday on Thursday.