January 6, 2007

 

US Wheat Review on Friday: Losses fade on late position-evening

 

 

U.S. wheat futures ended firmer Friday as pre-weekend position-evening boosted prices after early losses and two days of heavy selling, sources said.

 

Borrowed strength from neighboring grain markets offered further support, analysts added.

 

Chicago Board of Trade March wheat settled 2 3/4 cents firmer at US$4.70 1/4, Kansas City Board of Trade March wheat closed up 4 cents at US$4.81 1/4, and Minneapolis Grain Exchange March wheat ended 3/4 cent higher at US$4.87.

 

Wheat futures suffered heavy losses during the previous two day sessions, and selling interest had dried up by Friday, a floor broker said. Traders were left to even up positions ahead of the weekend, he added.

 

"We were hit pretty hard the last two days," the broker said.

 

Strong fund liquidation, in particular, dragged wheat to the downside Wednesday and Thursday but did not appear Friday, traders said. Funds were estimated to be even at CBOT.

 

In pit trades, Fortis bought 600 March, while Man Financial sold 200 March and Fimat sold 200 May.

 

Wheat futures felt some spillover strength from CBOT corn as it moved into positive territory late in the session, a source noted. CBOT corn is still considered wheat's leader, he said.

 

CBOT March wheat started off the day session weaker and hit a fresh three-month low before moving higher. Disappointment over export business was seen as an early bearish influence, floor traders said.

 

The U.S. Department of Agriculture reported Friday that weekly U.S. wheat export sales for the week ended Dec. 28 were 135,100 metric tonnes, a marketing-year low that was below trade expectations. Analysts surveyed by Dow Jones Newswires had predicted sales would fall between 200,000 tonnes and 400,000 tonnes.

 

The weekly sales were 62% below the previous week and 68% under the prior four-week average, the USDA said.

 

An analyst noted the sales occurred during a holiday week, during which business is expected to be slow. Nevertheless, traders said they saw the news as bearish because overall export business continues to lag against expectations.

 

Analysts and traders, meanwhile, said wheat bought for local suppliers in Thursday's tender by Egypt's General Authority for Supply Commodities was "old business" and was mostly already held in domestic stores by the private sector.

 

GASC said it bought a total of 370,000 tonnes of U.S., Russian and Kazakhstan wheat Thursday, with 250,000 tonnes for local suppliers.

 

Traders are looking toward the release of U.S. Department of Agriculture reports on Jan. 12 for estimates on winter wheat planting and demand, they said. Expectations that plantings will increase in the U.S. and abroad have added to the negative trading bias, an analyst added.

 

Next week, fund activity and movements in corn will continue to direct wheat futures prices, the analyst said.

 

 

Kansas City Board of Trade

 

KCBT March wheat traded higher during much of the day session while CBOT and MGE futures were weaker. KCBT had support from some speculative buying and ideas that wheat was oversold, a floor source said.

 

There also was short covering after losses earlier in the week, he noted.

 

Forecasts for more precipitation in winter wheat areas are bearish, sources added.

 

The U.S. Southern Plains have a strong prospect for a new round of harsh winter weather developing during the next week, the DTN Meteorlogix weather firm reported. The firm's forecast calls for light snow this weekend, followed by colder and stormy conditions next week.

 

Precipitation and storms have hit wheat-growing areas of the Plains for the previous two weekends.

 

"Additional moisture will be favorable for wheat later this season," Meteorlogix noted.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures trailed movements in CBOT wheat and corn, a floor source said.

 

"We were following Chicago," the source said. "Basically, we've been tied to Chicago for the past two to three days. As they move, we move."

 

Early fund selling helped drive prices lower at the opening, and there were some commercial buyers underneath the market later, he noted.

 

The source said he expected a bounce in prices next week after the losses seen this week.

 

"I think we've done the damage that we needed to do," he said.