US Wheat Review on Tuesday: Moderated gains sustained on equity strength

 

 

U.S. wheat closed up Tuesday, sustained by strength in equities markets. But wheat moderated its gains and closed at the low end of Tuesday's trading range as crude oil futures slipped.

 

Chicago Board of Trade May wheat gained 9 1/2 cents to US$5.32 3/4 per bushel. The most actively traded contract traded in an 8-cent range, topping at US$5.39. Kansas City Board of Trade May wheat gained 9 cents to US$5.83 3/4. Minneapolis Grain Exchange May wheat added 15 cents to US$6.26, while March wheat maintained its premium, closing up 14 3/4 cents at US$6.46 1/2.

 

Speculative funds bought an estimated 2,000 CBOT wheat contracts, according to midday estimates.

 

"The financial picture is still key," a CBOT floor trader said. "Strength in stocks was enough to sustain us today."

 

Still, he added, gains in the agricultural complex moderated as crude oil swung to a loss and the U.S. dollar index showed lesser weakness.

 

The U.S. Department of Agriculture is scheduled to release updated supply and demand tables at 8:30 a.m. EDT (1230 GMT) Wednesday. The average of trade estimates for stocks is 659 million bushels, up from 655 million in February, according to a Dow Jones Newswires survey of 12 analysts.

 

Most analysts see wheat stocks as flat-to-higher, citing anemic export business.

 

"Chicago wheat is showing no signs of life from a money flow perspective but has begun to show a very impressive increase in open interest," said financial advisor Shawn Hackett in his most recent Money Flow Report.

 

"We are at the moment of truth for the wheat market as prices are currently pressed right against the major long-term down trend line," he added. "Any surge through this area could light a fire under this market."

 

Investors should wait to see greater money flow into U.S. wheat before buying, but end users should consider covering some hard red wheat needs at the Kansas City Board of Trade "to guard against a bullish weather-induced rally," Hackett said.

 

Concerns about weather, mostly drought in the HRW-growing areas of the southwestern Plains, but also some chatter about winter wheat kill in areas where warmth has faded back to temperatures in the teens, has added decent support to the market, a CBOT floor broker said.

 

 

Kansas City Board of Trade

 

Traders at the Kansas City Board of Trade see "a small chance for moisture in the next 6 to 10 days in the much-needed areas of the HRW wheat belt," according to KCBT market commentary.

 

"Warm conditions linger across the southern Plains, where a band of beneficial rain showers has developed from central Oklahoma southwestward into West Texas," according to a Tuesday forecast by USDA meteorologist Brad Rippey.

 

Mid-to-late-week rainfall could offer 3-6 inches to drought-stricken south-central Texas into Arkansas, Rippey added.

 

 

Minneapolis Grain Exchange

 

Traders of MGE hard spring wheat contracts continued to crank the front month's premium to the deferred months.

 

March contracts closed at a 21-cent premium to the May, 1 cent higher than Monday's inverse spread.

 

Traders and analysts cite tight deliverable stocks for the added March premium.