January 29, 2009

Technical buying and short covering pushed U.S. wheat futures higher Wednesday as the markets continued their see-saw trade.

 

Chicago Board of Trade March wheat finished up 10 1/2 cents at US$5.95 1/4 per bushel. Kansas City Board of Trade March wheat rose 11 cents to US$6.26, and Minneapolis Grain Exchange March wheat jumped 10 3/4 cents to US$6.73 1/4.

 

The markets' gains followed losses Tuesday. Wheat has recently traded back-and-forth in a sideways pattern with little strong direction, an analyst said.

 

CBOT March wheat closed above major moving averages, including the 20-day moving average around US$5.92. The contract hit an open outcry session high of US$6, which is its 100-day moving average and a key resistance level, a trader said.

 

There was some fundamental support from expectations for improved demand, said Sid Love, analyst for Kropf & Love Consulting. Rising world wheat values have made U.S. wheat more competitive on the world export market, analysts said.

 

Some demand is expected to shift to North America from Argentina, where drought has slashed production and export potential, analysts said. Brazil, which is typically the biggest buyer of Argentine wheat, is expected to import a total of 7 million tonnes of wheat in 2008-09, according to the U.S. Department of Agriculture.

 

"Will it be Canadian or U.S. [wheat] that goes to Brazil? Probably both," Love said. "We're getting some action there"

 

CBOT corn and soybeans closed higher with wheat. Wheat will continue to keep an eye on activity in the neighboring markets, which are following forecasts in Argentina amid concerns about dryness, a trader said.

               

         

Kansas City Board of Trade

                            

KCBT wheat futures finished higher in thin, choppy trading, a trader said. Gains at the CBOT helped lead the market higher, he said.

 

There was continued chatter about dryness in hard red winter wheat areas of the U.S. Plains. Concerns about unfavorable conditions are warranted this early in the year because acreage is down from last year, analysts said.

 

"Either it rains in the Plains by April or blowing dust will ignite the futures," Love said. "If you get to the middle of March and it's dry, the wind is going to pick up. [It] always does.

 

HRW wheat seeded area for 2009 is about 30.2 million acres, down 4% from 2008, the USDA said earlier this month. The late row crop harvest and lower prices limited planted acres in most parts of the Plains, according to the agency.

             

          

Minneapolis Grain Exchange

           

MGE wheat took its cue from gains at the CBOT, a trader said. Worries that supplies of hard red spring wheat are tight helped support the nearby March contract's premium over the May contract, an analyst said.

 

The March-May spread was 8 cents at the close, unchanged from Tuesday. May wheat closed up 10 3/4 cents at US$6.65 1/4.