US Wheat Review on Wednesday: Hits 1-month highs on index fund influence

 

 

U.S. wheat futures rallied to one-month highs Wednesday amid influence from index funds and technical buying, analysts said.

 

Chicago Board of Trade March wheat ended up 14 1/4 cents at US$5.67 1/4 per bushel. Kansas City Board of Trade March wheat jumped 13 3/4 cents to US$5.60 1/2, and Minneapolis Grain Exchange March wheat rose 15 1/4 cents to US$5.71 1/2.

 

Index fund buying or positioning in anticipation of index fund buying seemed to push prices up, analysts said. Expectations for the funds to buy the grains as part of a rebalancing process have been supportive lately, but it's unknown exactly how many contracts they will buy or when they will buy. Some traders had expected buying to begin Friday.

 

Speculative funds hold a large net short position in CBOT wheat, which leaves the market vulnerable to short-covering rallies. Commodity funds bought an estimated 4,000 wheat contracts at the CBOT, a floor trader said.

 

CBOT March wheat closed near its session high of US$5.67 3/4, its highest price since Dec. 4, and finished above a resistance level around US$5.60-US$5.62, a floor trader said. Trading was thin and choppy.

 

 

Kansas City Board of Trade

 

KCBT March wheat closed at its session high of US$5.60 1/2, its highest price since Dec. 4. Technical buying was supportive in low volume, traders said.

 

The fundamental supply and demand storyline for wheat remains weak, as world supplies are large and export demand for U.S. wheat is slow. The U.S. Department of Agriculture is expected to increase its U.S. wheat carryout estimate and reduce its export forecast in a supply/demand report due out Jan. 12, analysts said. The USDA will also issue its first estimates on U.S. winter wheat acreage Jan. 12.

 

Gains Wednesday were "more about money flow and early year positioning than it is about rational fundamentals," an analyst said.

 

 

Minneapolis Grain Exchange

 

MGE March wheat finished near its session high of US$5.71 3/4, its highest price since Dec. 4.

 

Traders will look at the USDA's weekly export data, due out at 8:30 a.m. EST Thursday. Export sales of U.S. wheat for the week ended Dec. 31 are expected to be 200,000 to 550,000 tonnes.