January 1, 2009

 

US Wheat Review on Wednesday: Spillover, positioning support late rally

 

 

U.S. wheat futures ended the year mostly higher Wednesday, with gains supported by rallies in neighboring markets and position-squaring.

 

Chicago Board of Trade March wheat rose 6 cents to US$6.10 3/4 a bushel. Kansas City Board of Trade March wheat finished up 8 1/4 cents at US$6.30, and Minneapolis Grain Exchange March wheat slipped 3/4 cent to US$6.54 3/4.

 

Wheat moved higher late in the trading session at the CBOT and KCBT, while MGE March wheat pared losses. The markets had spent most of the day session in negative territory, but gains in CBOT corn and soybeans provided spillover strength, a CBOT floor trader said.

 

"If corn and beans are higher, wheat's not going to be left behind," he said.

 

There was some short-covering ahead of the end of the month, end of the quarter and end of the year, an analyst said. Trend-following speculative funds are net short in CBOT wheat.

 

Volume remained thin, with the markets still in holiday mode, traders said. The CBOT, KCBT and MGE will be closed Thursday for New Year's Day and trade normal hours during Friday's day session.

 

The year was volatile for grain markets, with the nearby CBOT wheat contract hitting an all-time high of US$13 in February on concerns about tight global supplies. Wheat has tumbled since the record-breaking rally as farmers worldwide expanded plantings to cash in on the lofty prices.

 

Kansas City Board of Trade

 

KCBT wheat futures led the upside on positioning and spillover buying from other markets, a trader said. KCBT March wheat ended at its open outcry session high. The contract finished the year down 54% from the all-time high for a nearby contract of US$13.70, hit in February.

 

Disappointment about sluggish export demand weighed on wheat early in the day session Wednesday, an analyst said. Iraq bought wheat from non-U.S. countries, according to reports.

 

There are ideas U.S. wheat prices are too expensive to attract export demand, analysts said. Wheat from countries in the Black Sea region, including Ukraine and Russia, is considered to be more competitively priced.

 

The U.S. Department of Agriculture on Friday will issue its weekly export sales report. Analysts expect U.S. wheat export sales of 100,000 to 200,000 tonnes.

 

Minneapolis Grain Exchange

 

Nearby MGE March wheat closed slightly lower, although deferred contract months ended firmer with the other markets. MGE May wheat rose 1 cent to US$6.58 1/4, while MGE July wheat gained 2 1/2 cents to US$6.64 1/4.

 

MGE March wheat closed down nearly 74% from the all-time high of US$25 for a nearby contract. The MGE led the upside in February's record-breaking rally amid strong demand for high-quality hard red spring wheat and shrinking supplies.