January 25, 2007

 

US Wheat Review on Wednesday: Ends down in correction, corn spillover

 

 

U.S. wheat futures settled with moderate losses Wednesday giving back almost all the gains set Tuesday as the market was overdone to the upside and due for a correction, sources said.

 

CBOT March wheat fell 14 1/4 cents to US$4.66, KCBT March wheat dropped 14 cents to US$4.86 3/4, and MGE March wheat declined 10 3/4 cents to US$4.95.

 

Lower corn and soybean values also added to the weak tonnee as the grain markets negatively interpreted President Bush's call to reduce domestic gasoline consumption by 20% in 10 years through increased renewable and alternative fuels production, sources added.

 

To reach the goal, Bush said the renewable fuels standard should be increased to 35 billion gallons by 2017, nearly five times the 7.5 billion gallon target for 2012 established in the 2005 Energy Bill.

 

Despite this, it was "buy the rumor, sell the fact day," floor traders said.

 

There was no fundamental justification for the gains in wheat on Tuesday and the market corrected Wednesday, said Bill Nelson, associate vice-president at AG Edwards & Sons in St. Louis.

 

Although world wheat stocks-to-use ratio remains low, domestically wheat fundamentals are bearish, he added.

 

There was no new catalyst to support wheat, a commission house analyst said. Wheat is a feed grain, and if corn is down 10 cents, wheat will be down proportionately, he noted.

 

The market just grinded lower all day with light fund selling helping to push it down, a floor trader added.

 

Fund selling was estimated at 3,000 contracts.

 

On daily technical charts, March wheat finished below its 10-day moving average but held within its recent trading range, floor sources said.

 

The nearby CBOT wheat-corn spread is trading near 66 cents, narrowing after Wednesday's trade and should provide some support to prices Thursday, a trader said.

 

In the U.S. soft red winter wheat belt, there is a chance for light snow or flurries Thursday and Friday in the northeastern sections of the region, Meteorologix Weather said.

 

Temperatures are expected to average below normal Thursday and below normal Friday in eastern sections of the region, Meteorologix said.

 

In the 6-to-10 day outlook, temperatures are expected to average near-to-below normal with precipitation near-to-below normal.

 

In CBOT trades, ABN Amro sold 500 March and JP Morgan sold 500 March.

 

 

Kansas City Board of Trade

 

Technical weakness and spillover losses from the downturn in Chicago grain markets pressed hard red wheat futures, floor sources said. Bear market spreading was also a feature with the Mar.-May spread active, they added.

 

JP Morgan bought 1,200 March, Man Financial bought and sold 400 March, and Prudential bought 400 March and 300 May.

 

On daily technical charts, KCBT March remained within the range established earlier this month, but below its 10-day and 20-day moving averages.

 

Mostly dry conditions are expected through Thursday in the U.S. hard red winter wheat belt with a chance for some light precipitation Friday, DTN Meteorologix Weather said. Temperatures are expected to average near to above normal in the period.

 

In the 6-to-10 day outlook temperatures are expected to average near-to-below normal, with precipitation near-to-below normal north and central areas, near-to-above normal south.

 

 

Minneapolis Grain Exchange

 

Disappointment over President George W. Bush's alternative energy proposals and spillover from the rest of the grain futures weighed on spring wheat futures, a floor analyst said. There was nothing new to trade on, so the market retreated. Light technical selling and profit taking also added to the declines, the analyst added.

 

On Thursday, the U.S. Department of Agriculture is scheduled to release the weekly export sales report for the period ending Jan. 18 at 8:30 a.m. EST (1430 GMT). Analysts expect sales between 300,000-600,000 metric tonnes. Last week's sales totaled 824,700 tonnes.