February 28, 2007

 

US Wheat Review on Tuesday: Settles lower on commodity wide sell-off

 

 

U.S. wheat futures settled lower Tuesday but well above steep losses set earlier in the session on commodity-wide selling after China's stock market suffered sharp losses overnight, CBOT floor traders said.

 

CBOT March wheat fell 12 3/4 cents to US$4.70 1/4, KCBT March wheat declined 10 1/4 cents to US$4.97 1/2, and MGE March wheat settled 11 1/2 cents lower at US$5.02 1/2.

 

Large scale losses in gold, silver and crude oil helped spark the early retreat with spot-month CBOT March falling as low as US$4.58 per bushel at one point, 35 cents below Monday's high.

 

Technical selling, based on Monday's bearish technical reversal also added pressure, a floor broker added.

 

Last week's interest rate increase by the Bank of Japan and the actions overnight in China's stock market raised concerns about liquidity drying up and the markets sold off as a result, said Bill Nelson, associate vice president with AG Edwards & Sons in St. Louis.

 

The decline in China's equity markets and a sell off in emerging markets suggests a flight out of commodities Tuesday, Nelson said.

 

The lack of additional selling interest at session lows brought in some short covering and futures staged a moderate recovery, but were unable to continue to rally as commodities in general remained under pressure, a commission house analyst said.

 

Wheat's price direction on Wednesday depends on the direction of corn futures as well as outside markets, Nelson said.

 

On daily open auction technical charts, CBOT May gapped open lower and traded down to its lowest level since Feb. 16, ending below its 50-day and 100-day moving averages.

 

In CBOT trades, JP Morgan bought 500 May, Fimat bought 400 May and Calyon sold 700 May.

 

Commodity fund selling was estimated at 5,000 contracts.

 

 

Kansas City Board of Trade

 

Hard red winter futures ended lower as the commodity wide sell-off pressured prices, a KCBT floor trader said. Weaker corn futures also added pressure as wheat "remains in the role of a follower," the trader said.

 

On daily open auction technical charts, May wheat gapped open lower and finished beneath its 100-day moving average.

 

 

Minneapolis Grain Exchange

 

Spring wheat futures settled lower, dragged down by the sell-off across commodities, with technical selling adding to the weakness, an MGE floor source said.

 

On daily open auction charts, May wheat traded down to its lowest level in two weeks but rebounded to finish above its 100-day moving average.