April 5, 2007

 

US Wheat Review on Wednesday: Closes solidly higher in rebound

 

 

U.S. wheat futures settled solidly higher Wednesday as the grains markets rallied on ideas they were oversold, traders and analysts said.

 

Chicago Board of Trade May wheat finished 12 1/4 cents higher at US$4.31 1/4 per bushel. Kansas City Board of Trade May wheat closed up 12 3/4 cents at US$4.55, and Minneapolis Grain Exchange May wheat ended up 11 cents at US$4.86.

 

Wheat suffered heavy losses recently under spillover pressure from weakness in the CBOT corn market and was due for a bounce, analysts said. The steep declines in the grains came after the U.S. Department of Agriculture released a prospective plantings report Friday that estimated U.S. corn plantings would be higher than expected.

 

CBOT corn also rebounded Wednesday.

 

"It looks like everything wanted to turn up in the grain markets," said Phil Storer, director of commodity trading with Dillon Gage. "That's not surprising because they really overdid the sell-off."

 

Fund buying of an estimated 5,000 wheat contracts at the CBOT and expectations for an increase in export business also were supportive, traders added.

 

Iraq issued a tender to buy 50,000 metric tonnes of hard wheat from the U.S. or Canada for April to May shipment, according to a news report. The volume was said to be nominal and subject to negotiation. CBOT floor traders speculated the tender would end up being as high as 200,000 to 400,000 tonnes.

 

Forecasts for frigid weather in the U.S. Plains and Midwest were another mildly friendly factor, a CBOT floor trader noted. Cold conditions predicted for late this week threaten to nip winter wheat in the Plains and Midwest, according to DTN Meteorlogix. Temperatures will sink into the teens to lower 20s Fahrenheit in both regions, the weather firm said.

 

The greatest threat to wheat will be in soft wheat areas of the Ohio Valley and the northern Mississippi Delta, Meteorlogix reported. Any wheat that is in the flowering stage is at risk for significant damage even at 31 degrees Fahrenheit, although it doesn't appear temperatures will be cold enough to threaten jointing wheat in Oklahoma and Texas, Meteorlogix said.

 

In CBOT pit trades, Citigroup bought 1,000 December, while ADM and Iowa Grains each bought 500 May. Fortis sold 500 May, and Iowa Grains sold 400 May. JP Morgan spread 800 May/July.

 

Looking ahead, market participants will likely even up some positions Thursday before the three-day weekend, traders said. Friday's day trading sessions are closed at the CBOT, KCBT and MGE in observance of Good Friday.

 

On Thursday, the USDA will report weekly export sales for the week ended March 29. Analysts surveyed by Dow Jones Newswires estimated sales would be in the range of 400,000 to 500,000 tonnes.

 

 

Kansas City Board of Trade

 

Concerns that cold weather will damage vulnerable wheat plants in the Plains this weekend were supportive to KCBT prices, a floor trader said. KCBT wheat futures also felt spillover support from gains at CBOT, he added.

 

Floor activity was decent, the trader said. In pit trades, Prudential bought 200 May and 200 July. UBS bought 100 December and sold 100 May. Fimat bought 100 July and sold 100 July. ADM bought 100 July and Term Commodities bought 100 May.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures found support from advances in the CBOT wheat and corn markets, a floor trader said. Market participants expected to see wheat bounce Tuesday, but the turnaround was pushed back until Wednesday, he noted.

 

"I think it just was overdone more than anything," the trader said about recent declines in wheat. "Corn took off and that had everybody a little bit excited again."

 

Ideas that fresh global demand would show up after recent price breaks were further supportive, the trader added. There also was some light commercial buying, he said.