January 31, 2008

 

US Wheat Review on Wednesday: Sharp losses as markets pull back

 

 

Most U.S. wheat futures closed sharply lower Wednesday on profit-taking and amid bearish chatter about demand, analysts said.

 

Chicago Board of Trade March wheat fell 21 1/2 cents to US$9.22 1/2 per bushel. Kansas City Board of Trade March wheat dropped 23 1/4 cents to US$9.67, and Minneapolis Grain Exchange March wheat rose 16 cents to US$13.43.

 

The markets were due for a setback after recent rallies, analysts said. Prices at all three exchanges have climbed recently amid upside leadership from MGE.

 

"We put on substantial gains in the wheat and some sort of a retracement here is not to be unexpected," said Greg Wagner, director of marketing and risk management for Horizon Ag Strategies.

 

Nearby MGE March wheat hit limit up, 30 cents higher, in a string of previous day sessions, lending support to CBOT and KCBT wheat. MGE wheat traded without limit restrictions on Wednesday, except for a brief stop at limit down, and that was seen as bearish for the CBOT and KCBT, an analyst said.

 

Looking at fundamentals, there are bearish expectations that the U.S. will face more competition for export sales now that Argentina has said it is reopening its wheat export registry for 2 million tonnes, an analyst said. New wheat exports will be limited to 2 million metric tonnes and spread over the next five months, with a maximum of 400,000 tonnes shipped per month, Argentina's Agriculture Secretariat said.

 

There also is talk that Ukraine might raise its grain export quotas, an analyst said. The government previously earmarked 1.2 million tonnes of grain from 2007 harvest for export Jan. 1 to March 31, 2008.

 

The U.S. Department of Agriculture on Thursday is set to release its weekly export sales report. U.S. wheat export sales as of Jan. 24 are seen at 300,000 tonnes to 700,000 tonnes, analysts said.

 

 

Kansas City Board of Trade

 

KCBT wheat futures slipped back with CBOT wheat. The market was consolidating after recent rallies, with little fresh news to push prices higher, a KCBT floor trader said. The weakness at the MGE also was a feature, he said.

 

Hard red winter wheat areas near Wichita, Kan., and to the east may receive snowfall in excess of 4 inches, T-Storm Weather said in a forecast. However, most of the the western portion of the Plains should remain dry, the private weather firm said.

 

 

Minneapolis Grain Exchange

 

MGE March wheat set a new all-time high of US$13.55 in overnight electronic trading, exceeding the previous high of US$13.27 set Tuesday. The contract opened firmer on follow-through buying but then fell limit down, or 30 cents lower, as the market pulled back.

 

Within the first 30 minutes of the day session, MGE March wheat traded in a 53-cent range. After hitting limit down, the contract rebounded to close higher on ongoing bullishness about solid demand for spring wheat, traded at the MGE, a floor trader said. Deferred months at the MGE sold off in a correction to recent strength, he said.