US Wheat Review on Friday: Losses tied to direction of corn, soybeans

 

 

U.S. wheat wrapped up a bearish week with additional losses, driven mostly by the direction dictated by neighboring markets.

 

Chicago Board of Trade March wheat Friday lost 3 1/4 cents to US$5.35 1/2 a bushel, at the low end of a 15 1/2-cent trading range. May wheat dropped 3 1/4 cents to US$5.48 1/4. Kansas City Board of Trade March wheat shed 1/2 cent to US$5.74 1/2, and Minneapolis Grain Exchange March wheat slipped 3 1/2 cents to US$6.36.

 

Speculative funds sold at least 1,000 contracts at the CBOT, according to midday estimates.

 

"The markets are tired; it's been a rough week," said Money Flow report author Shawn Hackett, president of Hackett Financial Advisors. "People are ready for a three-day weekend; there's little going on today in anything."

 

Corn and soybeans "fell apart," leaving not much for the low-volume wheat trade to hold on to going into the three-day weekend, a CBOT floor trader said.

 

The trade continues to keep one eye on the weather in China, but the drought didn't factor into the day's trade.

 

Funds were net sellers Friday, but one CBOT floor broker remarked that "someone is building big open interest; there's sizable buying we can't explain.

 

Chicago's open interest levels are increasing in an "impressive" fashion, but money flow is choppy, exhibiting mixed signals, Hackett says.

 

 

Kansas City Board of Trade

 

In contrast to Chicago, money flow on KCBT hard red winter wheat contracts is "pretty good" and with the severity of China's drought in HRW-growing areas, the KCBT HRW market "could be a sleeper bull market in 2009," Hackett said.

 

He is watching for KC to pull ahead of CBOT and MGE wheat markets.

 

More rain and irrigation have helped to further ease the drought in China's wheat-growing areas, the Office of State Flood Control and Drought Relief Headquarters said Friday.

 

China's wheat areas under drought were reduced by another 501,300 hectares from the previous day to 7.07 million hectares, the office said in a statement on its Web site.

 

Wheat areas under severe drought were also reduced by 229,300 hectares to 2.03 million hectares, it said.

 

However, the effects of the drought are likely have worsened in more than 3.33 million hectares due to a lack of irrigation facilities, it said.

 

 

Minneapolis Grain Exchange

 

Hard red spring wheat also ended lower with the front-month contract at an 11 1/4-cent premium to May, as tight stocks in Duluth promise an interesting delivery period for the nearby contract.

 

"Buying interest in Minneapolis is usually pretty good on down days with commercial orders helping to support it, but around midday, buying interest in Minneapolis just gave up and kind of went away," a Minneapolis-based commercial trade analyst said. "Mills backed off bids on the spot market - basis levels slipped."

 

Farmers are still holding on to their grain, but with land rents and tax payments coming due "there's reason for mills to think some of this will come to market," the analyst said.

 

Moving forward he sees "a choppy trade, steady-to-lower" with volatility reduced to single-digit fluctuations.