January 4, 2007

 

US Wheat Review on Wednesday: Closes lower with no spillover strength

 

 

U.S. wheat futures tumbled to a sharply lower close Wednesday on a lack of fundamental support and without spillover strength from other markets, analysts said.

 

Strong fund selling further weighed on wheat prices during the day session, sources added.

 

Chicago Board of Trade March wheat ended 24 1/2 cents lower at US$4.76 1/2 a bushel. Kansas City Board of Trade March wheat settled down 23 cents at US$4.86 3/4, and Minneapolis Grain Exchange March wheat closed 23 cents lower at US$4.95 1/2.

 

There is little fundamental support for wheat as export sales have been slow and production is expected to increase this year, sources noted. CBOT corn is considered the leader of wheat and has lent spillover strength to wheat futures recently, they said.

 

That spillover support, however, was nowhere to be seen Wednesday, an analyst said.

 

Wheat futures were left "without that life raft," said John Kleist, senior analyst with Top Third Ag.

 

The U.S. Department of Agriculture reported export inspections for the week ended Dec. 28 were 19.559 million bushels, which sources said was relatively strong. The inspections were up from 13.635 million a week earlier.

 

Inspections for the current market year to date, however, were 484.553 million, down from 597.657 million at the same time last year, according to the USDA.

 

Favorable precipitation that has swept through the U.S. Plains during the past two weekends was another bearish factor, sources said. Up to three feet of snow fell in some winter wheat-growing areas during the New Year's holiday weekend and covered the crops with a beneficial blanket of snow, they added.

 

Crops in the U.S. Southern Plains are doing "exceptionally well," Kleist noted.

 

Wheat futures started the day session with negative carryover momentum from the overnight electronic trading session, during which CBOT March wheat fell 15 cents, one trader added.

 

More pressure came in later from funds selling an estimated 4,500 contracts, CBOT floor sources said.

 

In CBOT pit trades, Fimat sold 4,000 March and bought 1,000 March. Iowa Grains sold 600 March, while Calyon and Shatkin-Arbor each sold 400 March. JP Morgan bought 1,500 March.

 

Funds were net long 28,332 contracts at CBOT at of Dec. 26, the Commodity Futures Trading Commission reported. Funds cut short positions by 3,683 contracts and lifted longs by 4,934 contracts, the CFTC said.

 

Commercials were net short 1,872 contracts at CBOT, according to the CFTC. They increased longs by 4,127 and shorts by 10,395.

 

Looking ahead, a trader said he expected wheat would bounce back somewhat Thursday, although he added that "it all depends on corn."

 

 

Kansas City Board of Trade

 

KCBT wheat futures felt pressure from the recent beneficial weather that moved through the Southern Plains, a floor source said. Funds were sellers during the day session, he added.

 

Pressure from CBOT wheat futures also pushed KCBT prices lower, the source noted.

 

In KCBT futures, funds were net long 29,905 contracts, according to the CFTC. They increased long positions by 1,775 and shorts by 1,420.

 

Commercials were net short 21,531 futures contracts, according to the CFTC. They decreased longs by 112 and shorts by 480.

 

 

Minneapolis Grain Exchange

 

The primary driver for MGE wheat futures was the CBOT, a floor source said. MGE prices were weighed down by lower CBOT wheat and corn prices throughout the day session, he noted.

 

"The pressure coming out of Chicago and the corn and wheat pits was just too much for us to handle," the source said.

 

MGE also saw some inter-market spread trading against CBOT during the day session and some profit-taking, a floor source said. Funds bought and sold, he added.

 

At MGE, funds were net long 13,854 contracts. Funds decreased longs by 370 contracts and shorts by 83 contracts.

 

Commercials were net short 10,750 contracts, the CFTC reported. They decreased shorts by 124 and longs by 348.