US Wheat Review on Tuesday: Rallies after setting contract lows early

 

 

U.S. wheat futures closed near session highs Tuesday in a technical bounce from contract lows and following a late round of short-covering, traders said.

 

Chicago Board of Trade May wheat ended up 7 1/4 cents, or 1.6%, at US$4.72 a bushel. Kansas City Board of Trade May wheat finished up 6 cents, or 1.3%, at US$4.79 1/2. Minneapolis Grain Exchange May wheat edged up 3 3/4 cents, or 0.8%, at US$5.

 

It appeared holders of short positions, or bets that prices will fall, took profits ahead of the end of the month and before the government issues crop reports Wednesday, an analyst said. Non-commercial speculative funds are heavily short in CBOT wheat and have already made money on their positions, he said.

 

Commodity funds bought an estimated 4,000 contracts.

 

The markets bounced after nearby May contracts early Tuesday set fresh contract lows for the fourth consecutive day at the CBOT and MGE. Nearby CBOT May wheat in electronic trading hit a new low of US$4.62 1/4, below Monday's low of US$4.63.

 

Prices rose even though wheat has bearish fundamentals, said John Kleist, broker and analyst at Allendale. World supplies are large, and U.S. wheat is too expensive to compete for export business on the world market, he said.

 

 

Kansas City Board of Trade

 

KCBT May wheat matched its contract low of US$4.73 1/4, which was set Monday.

 

Traders on Wednesday will digest USDA's crop reports and keep an eye on neighboring markets for direction, a broker said. The reports on prospective plantings and quarterly grain stocks are considered more important for corn and soy than for wheat. Traders already know wheat supplies are large and have an idea how much winter wheat was planted last autumn.

 

Bullish data for CBOT corn could help wheat advance through spillover buying, Kleist said. The markets are linked because funds often buy in a basket of commodities and because both grains are used for animal feed.

 

 

Minneapolis Grain Exchange

 

MGE May wheat set a fresh contract low of US$4.95 1/2, below the previous low of US$4.96.

 

The focus of USDA's reports for wheat traders will be 2010-11 U.S. spring wheat acreage because there is uncertainty about how much will be put in the ground. The average analyst estimate for plantings of spring wheat other than durum is 13.558 million acres, up from 13.3 million in the 2009-10 crop year, according to a Dow Jones Newswires survey.