March 27, 2008

 

US Wheat Review on Wednesday: Ends lower on profit-taking, fund selling

 

 

Profit-taking and fund selling drove U.S. wheat futures lower Wednesday amid bearish expectations for expanded global production, traders said.

 

Chicago Board of Trade May wheat dropped 34 1/2 cents to US$10.33 per bushel. Kansas City Board of Trade May wheat slid 50 cents to US$10.69, and Minneapolis Grain Exchange May wheat sank 45 cents to US$13.05.

 

The weakness in wheat followed two days of gains. The markets rose Monday and Tuesday on spillover from rallies in CBOT soybeans and corn. However, there less support for wheat from the neighboring markets Wednesday because soybeans did not close limit up for the first time this week, a CBOT floor analyst said.

 

Commodity funds sold an estimated 2,000 wheat contracts at the CBOT.

 

"I think we just had a run-up in the market," said Tom Leffler, owner of Leffler Commodities.

 

There also are bearish expectations for increased global production and ideas that U.S. prices are too high compared to the rest of the world, analysts said. Growers around the world are thought to have increased seedings due to high prices.

 

"We're going to be swimming in wheat next year," said Roy Huckabay, analyst for the Linn Group.

 

After the day session ended, Egypt's state-owned General Authority for Supply Commodities said it will tender to buy at least 55,000 to 60,000 tonnes of wheat. Egypt, a major buyer on the world wheat market, last week bought 415,000 metric tonnes of U.S. soft red wheat in a tender. The results of the latest tender will likely give the markets direction Thursday morning, traders said.

 

 

Kansas City Board of Trade

 

It was seen as somewhat bearish that Turkey canceled a tender for 250,000 metric tonnes of wheat, a KCBT floor trader said. However, Turkey should be back to looking for wheat again soon, they said.

 

Traders continue to watch weather forecasts amid worries about ongoing dryness in western areas of the Plains. There may be some rain in the HRW wheat belt next week, but the prospects for moisture will favor eastern and maybe south-central locations, rather than the west, DTN Meteorlogix said in a forecast.

 

 

Minneapolis Grain Exchange

 

There will likely be some positioning ahead of the release of the U.S. Department of Agriculture's prospective plantings report on Monday, traders said. The main focus of the report for wheat will be on spring wheat, seeded in the U.S. northern Plains, Leffler said.

 

"I think there's a lot of controversy about, 'Are we going to see an increase in plantings or are they looking at other commodities to plant up there?'" Leffler said.

 

The average estimate for all wheat seedings is 63.625 million acres, up from 60.433 million in 2007, according to a Dow Jones Newswires survey of 15 analysts. The average estimate for spring wheat other than durum is 14.147 million acres, up from 13.297 million last year.