US Wheat Review on Tuesday: Jumps on technical buying, short covering

 

 

U.S. wheat futures closed with double-digit gains Tuesday in a technical bounce from sharp losses.

 

Chicago Board of Trade March wheat ended up 12 1/2 cents, or 2.6%, at US$4.87 1/4 a bushel. Kansas City Board of Trade March wheat jumped 11 1/2 cents, or 2.4%, to US$4.99. Minneapolis Grain Exchange March wheat settled up 11 cents, or 2.2%, at US$5.12 1/4.

 

The markets were technically oversold and due for a bounce after getting caught up last month in heavy selling in the grains, traders said. As of Monday's close, CBOT March wheat had lost nearly a dollar since the U.S. Department of Agriculture issued bearish crop data Jan. 12.

 

Short-covering helped support wheat's recovery Tuesday, and non-commercial speculative funds still hold a large net short position in CBOT wheat, traders said. Commodity funds bought an estimated 4,000 contracts at CBOT.

 

Nearby CBOT March wheat in electronic trading hit a session high of US$4.92 1/2 and closed just below the 10-day moving average around US$4.89. The next upside price objective is a close above US$4.92, PFG Best said in a market comment.

 

It will be difficult for wheat to support an extended rally because ending stocks are large and export sales are lagging, traders said. CBOT March wheat has technical support at US$4.74, according to PFG Best.

 

 

Kansas City Board of Trade

 

Hard red winter wheat in Kansas, Oklahoma and Nebraska is in worse condition than it was a month ago, according to a report from USDA's National Agricultural Statistics Service. The crop in Kansas, typically country's top wheat-growing state, was rated 56% good to excellent as of Jan. 31, down from 69% good to excellent a month earlier.

 

One market analyst said the deteriorating condition ratings were supportive for KCBT wheat following a sharp drop in winter wheat plantings for the 2010-11 crop year. However, a trader said the declines weren't too worrisome because carryout is big enough to make up for production hiccups.

 

 

Minneapolis Grain Exchange

 

MGE wheat finished higher in a technical rebound from recent losses, traders said. Export demand for spring wheat, traded at the MGE, remains mostly routine, they said.

 

"Demand is not yet a driving force to pricing," PFG Best said.

 

Traders are starting to look ahead to USDA's supply/demand and crop production reports due out Feb. 9.