March 21, 2007

 

US Wheat Review on Tuesday: Ends higher in corrective bounce

 

 

U.S. wheat futures settled moderately higher Tuesday in a corrective bounce to recent losses and with spillover strength from the neighboring corn market, analysts said.

 

Chicago Board of Trade May wheat closed up 7 3/4 cents at US$4.62 3/4 per bushel. Kansas City Board of Trade May wheat ended 4 1/2 cents higher at US$4.83 1/2, and Minneapolis Grain Exchange May wheat finished 3 1/2 cents higher at US$5.01 1/2.

 

The gains came as a turnaround from declines during Monday's day session, an analyst said. Wheat continued to look to CBOT corn for direction and felt some upside support from its neighbor, he added.

 

"Wheat looks like it's trying very hard to stay above the January lows," said Doug Harper, analyst with Brock Associates. "I see that as key support."

 

The January low for CBOT May wheat is US$4.58 1/2.

 

Further price support at CBOT came from fund buying of an estimated 1,500 contracts. In CBOT pit trades, Fimat bought 300 May, while USA Trading and Calyon each bought 200 May. Man Financial sold 200 May. Tenco spread 900 May/July.

 

Fundamentally, wheat is weak, with crops looking good in the U.S. Central and Southern Plains, traders said.

 

News that Egypt's General Authority for Supply Commodities, or GASC, bought 60,000 tonnes of U.S. soft red wheat as part of a tender for a total of 144,000 tonnes was seen as supportive in early trading, an analyst said.

 

GASC bought 60,000 tonnes of U.S. soft red wheat from Toepfer at US$167.38/tonne, for delivery April 16-30, an official said. GASC also purchased 60,000 tonnes of Russian wheat from local supplier Egyptian Traders at 1,210 Egyptian pounds (US$212.3) a tonne and 24,000 tonnes of Russian wheat from local supplier Horus at EGP1,198/tonne, he said.

 

Still, export business has been lacking, Harper said. GASC last bought wheat March 14 when it purchased 120,000 tonnes of Russian wheat for delivery during May.

 

"There's just been very little bullish wheat export news," Harper said. "Just about anything is a nice morsel to grab on to."

 

Looking ahead, activity in the wheat market will likely remain choppy ahead of the release of the U.S. Department of Agriculture's planting intentions and grain stocks report on March 30, analysts said. The report is expected to show a shift of U.S. farm acres to corn as farmers look to take advantage of sharp demand for ethanol.

 

Wheat is seen to be largely biding its time before the report is released, analysts said.

 

 

Kansas City Board of Trade

 

KCBT wheat futures rebounded higher Tuesday in quiet floor activity after losses Monday, a floor trader said.

 

In pit trades, Frontier bought 600 July, while ADM bought 300 July and 300 December. Man Financial bought 300 May and 200 July. UBS sold 300 May.

 

Hard red winter wheat fundamentals are bearish as the U.S. crop is off to a good start and weather forecasts continue to look favorable, analysts said.

 

Kansas saw a 10-point increase in the amount of its winter wheat crop rated good to excellent in the USDA's weekly wheat condition report. For the week ended March 18, 50% of the Kansas crop was rated good and 20% was rated excellent. The previous week, 45% was rated good and 15% was rated excellent.

 

A developing system of showers will bring more favorable moisture to the developing crop in the U.S. Southern Plains, according to DTN Meteorlogix. There was rain overnight in Oklahoma and Kansas, and there will be scattered showers in the next couple days before heavier precipitation falls starting Friday, the weather firm said.

 

 

Minneapolis Grain Exchange

 

Trading at MGE was two-sided as the market watched activity in the CBOT corn market, a floor trader said. There was some light domestic pricing support, he said.

 

Volume for the day session was moderate, he said.

 

"There were periods of very small volume," he said. "There were other times when things were moving around."