February 10, 2006

 

US Wheat Review on Thursday: Higher on fund, technical buying

 

 

U.S. wheat futures settled higher Thursday, shrugging off Thursday morning's mildly bearish U.S. Department of Agriculture supply and demand report. The report was a little bearish but not bearish enough to stop the funds from buying, a CBOT floor analyst said.

 

As in recent sessions, hard red winter wheat futures in Kansas City led the way higher, with March HRW futures making another new contract high for the sixth straight trading day. Spot month KCBT March traded at its highest level since 2004.

 

CBOT March wheat rose 5 cents to US$3.56 3/4 per bushel, KCBT March settled 7 cents higher to US$4.33 1/2, and MGE March wheat gained 5 1/2 cents to US$4.09 1/2. CBOT March traded at its highest level since Sept. 30.

 

The USDA reported that U.S. wheat ending stocks in February were 542 million bushels, unchanged from January and slightly above the average analyst estimate of 536 million bushels.

 

The report, although slightly negative, was ignored as buying interest, thought to be fund and technically driven, helped lift nearby KCBT wheat futures to their highest levels since 2004, a floor trader said.

 

"Chicago is following Kansas City again," he said. There's nothing fundamental to support today's rally, he added.

 

The USDA reported export sales for the week ended Feb. 2 were 351,200 metric tonnes for the 2005-06 crop year, in line with analyst expectations of 200,000-400,000 metric tonnes.

 

In addition, Egypt's General Authority for Supply Commodities, or GASC, purchased 240,000 tonnes of Australian and French wheat overnight, bypassing U.S. wheat in favor of 180,000 metric tonnes of Australian wheat and 60,000 metric tonnes of French wheat.

 

Despite the export news, continued buying interest in hard red winter wheat futures in Kansas City spilled over into the other wheat markets, with gains in CBOT corn and soybean futures also adding support, a floor analyst said.

 

Although Iraq has postponed the results of its tender of up to one million tonnes of optional origin wheat until Sunday, the recent controversy surrounding the Australian Wheat Board in the oil-for-food program is seen as hopeful sign that the U.S. might sell wheat to the Iraqis, a local trader said.

 

Mostly dry conditions are forecast over the next several days in the Southern Central Plains, with little precipitation expected, DTN Meteorlogix weather said. Temperatures will vary in the period, with readings average near to below normal in the northern section and near to above normal in the southern section of the region, Meteorlogix said.

 

In technical trading news, the 14-day relative strength index now stands at 75.93 for March KCBT futures.

 

In CBOT trades, O'Connor bought 1,000 March and 400 May, Fimat bought 600 May, 500 March and 100 July, ABN Amro bought 400 May, and UBS bought 1,200 July.

 

O'Connor sold 1,000 March, UBS sold 900 March, Fimat sold 300 March, Rand sold 300 July, and JP Morgan sold 200 May.

 

Commodity fund buying was estimated at 2,900 contracts.

 

In KCBT trades, Fimat bought 200 May, Man Financial bought 200 March and sold 400 March, Prudential Financial bought 100 March and 200 July, the Refco division of Man Financial sold 200 July and UBS sold 100 July.

 

On Friday after the close, the Commodity Futures Trading Commission will release the commitments of traders data as of Feb. 7.