Speculators including hedge funds also are still betting the rally will end. Their net-short position, or wagers on lower prices, on the Chicago Board of Trade fell 52 percent in the week ended July 13 to 16,927 contracts, U.S. Commodity Futures Trading Commission data show. Speculators have held a net-short position since June 2009.

Wheat's surge since June 9 is the biggest in the Standard & Poor's GSCI Index of 24 commodities. The gain topped corn's 19 percent advance and is more than three times the 9.8 percent jump in soybeans. The S&P GSCI Total Return Index, tracking the net amount investors received, advanced 2 percent over the same period. The gauge slumped 46 percent in 2008, the worst crash since at least 1970.

For now, traders are focused on production rather than stockpiles. Wheat futures traded on the CBOT jumped 9.2 percent last week, the biggest gain since November, after drought worsened in Russia and lower grain output was forecast in Kazakhstan, Germany and France. All the countries are exporters.
Wheat rose 0.8 percent to $5.92 as of 8:27 a.m. in London.

Futures are pricing in $6.73 by the end of 2011, exchange data show. The December 2011 contract traded at $5.80 about five weeks ago, indicating some traders expect drought and flooding to tighten supply through the end of next year.

Eoin Treacy's view Wheat prices have rallied impressively over the last few weeks but have now returned to an area of prior resistance at the upper side of the 18-month base. As prices rallied from comparatively depressed levels, news flow concentrated on the late Canadian sowing, the threat of a locust plague in Australia and the Eastern European heat wave. However, the USDA's report that the US crop is relatively healthy has dampened speculative interest in the commodities at least in the short term.

Prices have become overbought in the short-term and at least some consolidation of recent powerful gains appears likely. A successful break above 600¢ would complete the developing base and indicate the bulls have regained medium-term dominance.

Chinese traded wheat remains in a relatively consistent uptrend and a sustained move below CNY2200 would be required to question scope for further upside.