January 10, 2007
US Wheat Review on Tuesday: Finishes weaker on late fund liquidation
U.S. wheat futures ended at or near session lows Tuesday amid a late round of fund selling and spillover weakness from other markets, sources said.
Chicago Board of Trade March wheat finished down 11 cents at US$4.53 per bushel, Kansas City Board of Trade March wheat closed 7 1/2 cents lower at US$4.71 1/2, and Minneapolis Grain Exchange March wheat settled down 8 3/4 cents at US$4.73 1/2.
CBOT March wheat ended 1 cent above its session low. The price tumbled lower near the end of the trading session after funds sold an estimated 4,000 contracts, a floor trader said.
Earlier, borrowed weakness from CBOT corn and soybeans, along with softer crude oil prices, helped pressure wheat, sources said.
Commodities in general felt pressure from Monday's Commodity Futures Trading Commission report that revealed larger-than-expected index fund long positions, a CBOT floor analyst noted.
The CFTC said in its first supplemental commitments of traders report that index funds at CBOT held net long positions totaling 201,104 combined wheat futures and options contracts as of Jan. 3. That represents nearly 41% of open interest, the CFTC reported.
Traditional large speculative traders were net short 1,094 contracts at CBOT, according to the CFTC.
There also was talk on the floor that index funds were rebalancing their positions, moving money out of wheat and corn and into natural gas, a source said.
In CBOT pit trades, Man Financial bought 600 March, while Fortis sold 400 March and Fimat sold 300 March.
Technically, a string of recent declines has done "serious near-term chart damage" to CBOT March wheat, a technical analyst said.
On the fundamental side, poor export sales and favorable growing conditions for U.S. winter wheat are bearish factors, a trader added. Traders are looking ahead to the release of key U.S. Department of Agriculture crop reports Friday, and buyers were hesitant to step out, a source added.
Production also is expected to increase globally.
Argentina will produce a record farm harvest of 90.5 million metric tonnes in 2006-07 partly due to steady rainfall in November and December which boosted wheat production, a consultant for AgricPac Consultores said. AgriPac pegs Argentine wheat production at 15 million tonnes, while the USDA last estimated it at 14.2 million tonnes.
Early drought had raised concerns about decreased wheat output from Argentina's 2006-07 crop, but "yields have been much higher than initially estimated with record yields in many areas this season," the analyst said.
Kansas City Board of Trade
KCBT March wheat ended 1/2 cent higher than its session low of US$4.71.
Speculative and follow-through selling early triggered sell stops that drove prices down, a floor source said. Otherwise, KCBT wheat futures followed activity at CBOT, he added.
Fund activity was not a major feature, he said.
"We did not have a big day," the source said.
Spillover pressure also was felt from softer CBOT corn and from crude oil, the source noted.
"Their weakness did erode over into wheat," he said.
At KCBT, index funds were reported to be net long 29,963 positions combined wheat futures and options, the CFTC said. That represented about 25% of open interest.
Traditional large speculative traders were net long 22,683 contracts at KCBT, according to the CFTC.
Minneapolis Grain Exchange
MGE March wheat ended at the session low. Price movements followed activity at CBOT, a floor source said.
Traders are waiting to see the winter wheat planting estimates in the USDA's Friday report, he noted. Expectations of increased production are bearish, he added.
Weather in hard red winter wheat areas looks "ideal" for crop development, the source said.
There was no supplemental CFTC report for MGE, although the standard report said large speculative traders were net long 12,544 positions. They decreased long positions by 1,103 and increased shorts by 57.
