January 5, 2007

 

US Wheat Review on Thursday: Ends down on corn weakness, fund sales

 

 

U.S. wheat futures ended in negative territory Thursday on weakness in neighboring markets and continued fund selling, sources said.

 

Chicago Board of Trade March wheat ended 9 cents lower at US$4.67 1/2 a bushel, Kansas City Board of Trade March wheat closed down 9 1/2 cents at 4.77 1/4, and Minneapolis Grain Exchange March wheat ended down 9 1/4 cents at US$4.86 1/4.

 

CBOT corn is the leader of the grains and also ended firmly lower, a floor trader noted. Wheat futures were trailing corn throughout the day session, he said.

 

"Wheat's the follower," the source said.

 

Wheat futures temporarily moved to the upside during the day session when CBOT corn futures prices were firmer, the trader added. A sale to Egypt also was seen by some as mildly supportive, an analyst said.

 

Egypt said it bought 60,000 tonnes of U.S. soft white wheat from Cargill at the price of US$181.97 a tonne, and 55,000 tonnes of U.S. soft red wheat from Perdue at the price of US$195.67/tonne. The government's decision to buy U.S. wheat, instead of French or Argentine wheat, came as somewhat of a bullish surprise, a source said.

 

The wheat rally couldn't be sustained, however, and funds came in to sell, the source added.

 

Wheat is weak fundamentally because overall export demand has been sluggish and growing conditions for winter wheat have been favorable, traders said.

 

In the eastern Midwest, rain is helping to maintain adequate-to-surplus soil moisture, and no significant cold weather is in sight, DTN Meteorlogix reported.

 

In China, conditions are expected to be colder Friday and Saturday but not cold enough to harm dormant winter wheat, the firm noted.

 

Wheat futures also are technically weak after CBOT March wheat prices hit a fresh three-month low Wednesday, an analyst said.

 

Traders said the market is looking toward the release of U.S. Department of Agriculture reports on Jan. 12 for indications on winter wheat planting and demand.

 

 

Kansas City Board of Trade

 

KCBT turned lower early on follow-through selling from the overnight but moved into positive territory temporarily on some speculative buying, a floor source said.

 

Weakness in the CBOT corn market, however, drove wheat to the downside, the source added. There was some fund selling, along with inter-market spread trades buying KCBT March wheat and selling CBOT March wheat.

 

The recent winter storms that dropped several inches of precipitation across the U.S. Plains and Midwest reduced abnormally dry conditions across western Kansas, where as much as five inches of precipitation was recorded, according to a Drought Monitor report issued Thursday by the USDA, National Weather Service and National Drought Mitigation Center.

 

Moderate and severe drought conditions in Nebraska were pushed westward, the report stated.

 

In Oklahoma, December turned out to be one of the wettest months on record for the state, according to the report. As a result, the "exceptional drought" status, the most severe drought intensity category, across part of the state was removed.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures trailed action at CBOT during the day session, a floor source said. The sale to Egypt was considered mildly bullish but more export business is still needed, he said.

 

There was selling interest from funds, and volume was moderate, he said.