US Wheat Review on Tuesday: Ends higher in modest bounce, trims gains

 

 

U.S. wheat futures ended firmer Tuesday in a modest bounce from steep losses, but the gains were pared before the close on spillover pressure from falling corn prices.

 

Chicago Board of Trade March wheat closed up 1 cent at US$5.70 3/4 per bushel, well below its open outcry session high of US$5.88. Kansas City Board of Trade March wheat rose 2 cents to US$5.97, and Minneapolis March wheat gained 8 3/4 cents to US$6.37.

 

The gains came after CBOT wheat on Monday closed down almost 60 cents, which is the daily limit, after U.S. Department of Agriculture crop reports showed bigger-than-expected grain and soybean stocks. CBOT corn and soybeans ended limit down Monday.

 

"My impression of yesterday's action was we overreacted," said Doug Houghtonne, market analyst for Brock Associates. "We were overbought in all these markets a bit going into the reports. With the corn and soybeans dropping so hard, the wheat was pulled along with it."

 

Strength in CBOT soybeans helped boost wheat early Tuesday, traders said. There are also supportive concerns about the potential for damage to U.S. winter wheat from cold weather this week, they said.

 

Forecasts show temperatures dropping well below 0 Fahrenheit through eastern Kansas, Missouri and Kentucky, allowing a winterkill threat to develop for a third of hard red winter wheat and at least half of soft red winter wheat, Cropcast Agricultural Weather said in a forecast. Wheat can suffer damage from winterkill, which reduces yields, if it is not protected by adequate snow cover when temperatures drop.

 

Wheat pared gains late on spillover pressure from losses in CBOT corn, Houghtonne said. March corn closed down 18 1/4 cents at US$3.62 1/2, and March soybeans closed up 5 1/2 cents at US$9.71 1/2.

 

"I don't think wheat's going to rally strongly with corn heading lower," he said.

 

 

Kansas City Board of Trade

 

KCBT March wheat finished higher but off its session high of US$6.16. Weakness in CBOT corn was a bearish influence hanging over the market, a trader said.

 

The demand outlook for wheat remains bearish, as U.S. wheat is priced too high to be competitive on the global market, analysts said. Egypt's state-owned wheat buyer, the General Authority for Supply Commodities, bought 60,000 tonnes of Russian wheat in a tender and none from the U.S. The Saudi Arabian government has purchased 400,000 metric tonnes of Canadian wheat, European traders said.

 

"U.S. wheat looks overpriced in the market," an analyst said. "Obviously we're going to have to find some (export) markets out there."

 

 

Minneapolis Grain Exchange

 

MGE wheat led the upside. MGE March wheat finished off its session high of US$6.54 1/4.

 

It seemed as though the market may have been catching up to recent gains in CBOT and KCBT wheat, a MGE trader said. CBOT wheat rose faster in the recent rally as the market has more speculative interest, while the MGE is more commercial, he said.

 

CBOT wheat also has a more direct relationship to CBOT corn and felt more pressure from weak corn prices, a trader said.