March 17, 2007

 

US Wheat Review on Friday: Closes up in bounce after recent declines

 

 

U.S. wheat futures finished higher in a rebound from recent losses and with some fund buying seen at the Chicago Board of Trade, analysts and floor traders said.

 

CBOT May wheat ended up 5 1/4 cents at US$4.60 3/4 per bushel, Kansas City Board of Trade May wheat closed 6 3/4 cents higher at US$4.86 1/2, and Minneapolis Grain Exchange May wheat closed up 6 3/4 cents at US$5.03 1/2.

 

CBOT wheat futures slumped earlier this week with the May contract slipping to its lowest level since September 27 early in Friday's day session. There was "no question" the market was in an oversold condition and due for a bounce, said John Kleist, senior analyst with Top Third Ag.

 

There was little fresh, fundamentally-bullish news to support the gains, traders added.

 

"It's just trading a bit of air," Kleist said about wheat. "It went through a lot of selling."

 

Funds bought an estimated 2,500 contracts during relatively thin trade at CBOT, a trader said. In pit trades, Man Financial bought 400 May. Prudential, Rand Financial, Shatkin Arbor and UBS each bought 300 May. Fimat spread 400 July/May.

 

There was some news out as Informa Economics, a private analytical firm, pegged the 2007-08 U.S. wheat crop at 59.810 million acres, traders said. The estimate is a minor decrease from the U.S. Department of Agriculture's most recent estimate of 60 million acres.

 

The data was considered slightly friendly by some, while others saw it as neutral.

 

"It's nothing big," one CBOT floor trader said.

 

But there was some chatter that Informa's estimate for corn acreage was too low, and that additional corn acres might come at the expense of spring wheat, Kleist noted.

 

Informa pegged 2007-08 U.S. planted corn acreage at 87.834 million acres and soybean acreage at 70.384 million acres, traders said. At its recent Outlook Forum, the USDA estimated corn acreage at 87 million acres and soybean acreage at 70.5 million acres.

 

Looking ahead, Kleist said wheat would likely struggle in the absence of new export business, realistic weather problems for the winter wheat crop, or strong gains in corn.

 

In other news, less than a week after rains, hailstorms and strong winds damaged India's wheat crop, the federal government moved in swiftly Friday and announced plans to possibly import up to 3 million metric tonnes of wheat.

 

At the same time, it also reduced the import duty on wheat to zero until Dec. 31 and further raised the minimum support price for wheat by INR1,000 (US$22.6) a tonne to INR8,500/tonne for making local purchases from farmers, in addition to a hike that had already been made earlier.

 

The news showed India was "leaving its options open" to import wheat, but the market wants to see actual export business come in, a CBOT floor trader said.

 

 

Kansas City Board of Trade

 

KCBT wheat futures ended firmer in a correction from recent losses amidst "pretty quiet" floor activity, a floor trader said. The market has been "shaking liquidation out" and may have "done enough of that" now, he said.

 

"We finally got the bounce we've been looking for," the trader said. "We kind of got done testing the downside a little bit."

 

There is little bullish fundamental news as the hard red winter wheat crop looks "great," he said.

 

The Southern Plains will be dry this weekend, but get wetter starting Monday and then stay that way for the week, according to DTN Meteorologix. As the wheat crop goes through spring growth, those wet conditions will be welcomed by growers, especially after drought conditions in recent years, the weather firm said.

 

 

Minneapolis Grain Exchange

 

There was good commercial demand below the market, although traders were mainly following activity at CBOT, a MGE floor trader said. Volume was "mediocre at best," he said.

 

"We were basically passengers with Chicago trade," he said.