March 5, 2008

 

US Wheat Review on Tuesday: Ends down on sell-off but off session lows

 

 

Profit-taking and a general sell-off of commodities Tuesday pushed U.S. wheat futures mostly lower, traders said.

 

Chicago Board of Trade May wheat slipped 15 cents to US$10.87 1/2 per bushel, the contract's lowest close since Friday. Kansas City Board of Trade May wheat dropped 10 3/4 cents to US$11.60, the contract's lowest close since Friday. Minneapolis Grain Exchange May wheat finished limit down, or 60 cents lower, at US$14.99 3/4, the contract's lowest close since Feb. 13.

 

Wheat futures felt spillover pressure from setbacks in neighboring and outside commodity markets, traders said. CBOT soybeans, soyoil, corn, rice and oats all temporarily hit limit down during the session after recently trading to all-time highs.

 

Commodity markets in general got jittery Tuesday after gold on Monday neared US$1,000 an ounce and crude oil closed above US$100 a barrel, said Jason Britt, analyst for Central State Commodities. Metals and energies were weaker Tuesday.

 

Liffe European wheat futures also finished lower Tuesday, extending an early pullback on spillover pressure from U.S. wheat and from the general weakness in commodities, traders said. Paris-based May dropped EUR3.50, or 1.2%, to end at EUR277.50 a tonne with 1,272 contracts traded.

 

"I think it's just an overall nervousness" that caused the markets to pull back, Britt said.

 

Sharp losses at the MGE added pressure to CBOT and KCBT wheat, he said.

 

However, some late buying helped trim losses, a CBOT floor trader said.

 

U.S. wheat futures started the day mostly stronger following gains overnight. Scattered demand news also lent some early support, analysts said.

 

The Taiwan Flour Millers Association said it bought 75,000 metric tonnes of U.S. No. 1 wheat, including dark northern spring wheat and hard red winter wheat, in a tender concluded Tuesday. One shipment will arrive in Taiwan May 9-23, and a second shipment will arrive May 24 to June 7.

 

Morocco's state wheat buyer said it was tendering to buy 136,050 metric tonnes of soft milling wheat, of any origin, from importers inside the country. The wheat is for delivery before April 1 and will be distributed to 13 regions across the country.

 

U.S. traders said they expected Morocco's tender could be filled with French wheat. The deadline for bids is March 18.

 

Japan said it is seeking 117,000 tonnes of wheat, including 50,000 tonnes of U.S. semi-hard wheat and 21,000 tonnes of U.S. western white wheat, in a routine tender to be concluded Thursday. The shipment would arrive between April and June.

 

Deliveries against the CBOT March wheat future were light at 664 contracts, traders said. The last trade date assigned was Feb. 22.

 

 

Kansas City Board of Trade

 

KCBT wheat futures spent most of the day following CBOT wheat, a KCBT floor trader said. Some market-on-close buying helped trim losses, he said.

 

KCBT July wheat, which represents the new crop, shook off its losses to end 1 cent higher at US$11.00. The contract traded as low at US$10.67 and saw a wide range of 53 cents.

 

"It was very, very light volume here in Kansas City, just basically following Chicago," the trader said.

 

Hard red winter wheat areas of the central southern Plains, including eastern Oklahoma and eastern north-central Texas, received up to 0.5 inch of rain and snow Monday into Tuesday, DTN Meteorlogix said. Central and eastern Texas were expected to see more light precipitation Tuesday and Wednesday, the private weather firm said.

 

However, the rest of the region will remain mostly dry for the rest of the week, Meteorlogix said. Temperatures are expected to go into a near- or above-normal range during the next six to 10 days, the firm said.

 

There were no deliveries against the KCBT March futures.

 

 

Minneapolis Grain Exchange

 

Limit-down MGE May wheat was synthetically offered about 40 cents lower at the close, although "bidders were definitely harder to come by," a floor trader said.

 

Volume was thin throughout the day, traders said.

 

It seems as though a "lack of news has caused to volume to leave" the MGE, a trader said. Activity on the floor Tuesday seemed as though it was the quietest since before a record-breaking rally in wheat started with a U.S. Department of Agriculture crop report released Jan. 11, he said.

 

Spot-month MGE March wheat, which is trading without limits because it is in delivery, dropped US$1.70 to finish at a session low of US$16.90, the contract's lowest close since Feb. 12. MGE July wheat temporarily traded limit down, 60 cents lower, but trimmed losses before the close.

 

"It didn't take much to turn it around," a trader said about the July contract.

 

Volume and open interest are thin in the March contract. At the close of business Monday, open interest was 109 contracts, according to the MGE. There were no deliveries Tuesday against the MGE March futures.

 

MGE wheat continued to pull back from record high prices, traders said. The cash market for spring wheat, traded at the exchange, also is quieting down some, an analyst said.