March 19, 2008

 

US Wheat Review on Tuesday: Climbs on spillover, rebound from losses

 

 

U.S. wheat futures climbed late Tuesday in a rebound from recent losses and amid spillover support from other markets, analysts said.

 

Chicago Board of Trade May wheat soared 32 1/2 cents to US$11.64 per bushel. Kansas City Board of Trade May wheat rose 13 cents to US$12.13, and Minneapolis Grain Exchange May wheat jumped 20 cents to US$14.10.

 

Wheat was oversold and due for a bounce after sliding the previous three day sessions, including a limit-down close Monday, traders said. The markets felt spillover support from stabilization in equities and from gains in CBOT corn and soybeans, they said. Commodities took a nosedive Monday as jitters about the economy pressured financial and equity markets.

 

"Today, it seems like we're getting a little bit more of a stabilization under it," said Jason Britt, broker and analyst for Central State Commodities.

 

There continues to be underlying support for wheat from solid global demand, a CBOT floor analyst said. Tunisia bought 84,000 metric tonnes of wheat of optional-origin, traders said. Jordan purchased 100,000 tonnes of hard wheat in a tender, according to a media report.

 

Egypt's state-owned General Authority for Supply Commodities said after the close it was tendering to buy at least 55,000 to 60,000 metric tonnes of wheat. Egypt, a major buyer on the world market, typically tenders for that amount and then buys more.

 

Floor trading was mostly quiet during the session, traders said. Volume was thin as the markets waited to see how much the Federal Reserve cut the Fed funds rate, they said.

 

The Federal Reserve slashed its key interest rate 75 basis points to a three-year low and signaled more reductions are likely. However, the cut was seen as a bit disappointing by traders who were expecting a full percentage point cut. A sharp reaction to the cut by outside financial markets could put renewed pressure on the grains, analysts said.

 

 

Kansas City Board of Trade

 

KCBT wheat futures were the most reluctant to rally and dragged other markets into negative territory at times during the day session, traders said. Bearishness about increased moisture in hard red winter wheat regions of the U.S. Plains weighed on KCBT wheat, Britt said.

 

A high-production corridor of the southern Plains wheat country, from south-central Kansas to north-central Texas, is in line to receive more favorable rainfall as winter wheat moves into its post-dormant stages, DTN Meteorlogix said in a forecast. On Monday, Wichita, Kan., took in 1.86 inches of rainfall, the private weather firm said.

 

"This moisture is very timely for wheat going into spring," Meteorlogix said.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures were mainly a follower of the other markets during the session, a trader said. Volume was thin amid a lack of fresh news, he said.

 

Expanded daily limits stay in effect Wednesday for CBOT, KCBT and MGE wheat futures. The limits jumped to 90 cents from 60 cents Tuesday after contracts closed limit down Monday.