January 9, 2010

 

US Wheat Review on Friday: Rallies late, ends solidly higher

 

 

U.S. wheat futures closed solidly higher Friday following a rally just before the close of trading that was thought to be tied to index fund buying.

 

Chicago Board of Trade March wheat ended up 10 3/4 cents at US$5.68 1/2 a bushel, up 27 cents on the week. Kansas City Board of Trade March wheat jumped 9 3/4 cents to US$5.60, and Minneapolis Grain Exchange March wheat soared 11 1/2 cents to US$5.75.

 

The gains followed a day of low-volume trading and were likely tied to index fund buying that has been anticipated for weeks, a CBOT floor trader said. Index fund buying was expected in the grains as part of a rebalancing of positions and should continue through late next week, traders said.

 

Based on the late surge of buying, sellers will likely be gun shy late Monday and there could be some early buying amid expectations for a repeat performance, said Vic Lespinasse, analyst for grainanalyst.com. The late rally was "pretty impressive," he said.

 

Wheat led the upside on the CBOT agricultural floor, as corn ended about 5 cents higher and soybeans finished about 5 cents lower. Spreading helped propel wheat higher, an analyst said. Non-commercial speculative funds hold a large short position in CBOT wheat, which makes the market vulnerable to short-covering.

Kansas City Board of Trade

 

KCBT March wheat finished up 23 3/4 cents on the week.

 

The late gains sent wheat into the weekend with a strong technical close, said Greg Wagner, analyst for AgResource Company. The markets had an "outside day up," in which they traded below the previous day's low and closed above the previous day's high.

 

"It looks like from a technical standpoint that it's a very positive close," Wagner said. "Who is behind the buying is subject to debate, but clearly somebody was interested in buying wheat."

Minneapolis Grain Exchange

 

MGE March wheat finished up 30 cents on the week. The markets strengthened, even though fundamental supply and demand factors are not supportive, traders said.

 

The U.S. Department of Agriculture on Tuesday is slated to issue reports on global supply and demand, quarterly U.S. grain stocks and its first estimates on U.S. winter wheat plantings. U.S. carryout is expected to rise due to slow export demand, analysts said. Acreage is thought to be down from last year because of planting delays and weak prices, but U.S. and world supplies are large enough to absorb a smaller crop, they said.