April 11, 2008

 

US Wheat Review on Thursday: Slips on technicals, world crop prospects

 

 

U.S. wheat futures closed mostly lower Thursday on technical selling and expectations for a strong world crop, analysts and traders say.

 

Chicago Board of Trade May wheat stumbled 11 cents to US$9.23 per bushel. Kansas City Board of Trade May wheat shed 13 1/4 cents to US$9.74 3/4, and Minneapolis Grain Exchange May wheat gained 5 cents to US$13.25.

 

Old-crop stocks remain tight, but the markets are more comfortable removing risk premium due to the approaching harvest of new-crop winter wheat, an analyst said. Growers worldwide are thought to have seeded more wheat for the new crop in response to high prices.

 

Wheat also continues to look weak from a technical standpoint, said Doug Houghton, market analyst for Brock Associates. Spillover support from a strong rally in the CBOT soy complex likely prevented CBOT wheat from falling even deeper into negative territory, he said.

 

"Without beans, we'd probably be a fair amount lower," Houghton said.

 

CBOT soybeans and corn are expected to continue influencing wheat in the near term, Houghton said. Pressure on the wheat markets will likely build as the new-crop harvest nears, he said. Continued weakness in the dollar could inspire inflationary buying.

 

"I think we're likely to see a continued choppy volatile trade here in the near term," Houghton said.

 

Commodity funds sold an estimated 1,000 contracts at the CBOT.

 

 

Kansas City Board of Trade

  

Forecasts for moisture in the U.S. Plains were seen as bearish, particularly for KCBT hard red winter wheat futures, an analyst said. More than 1 inch of rain has already fallen in the southern Plains this week, according to DTN Meteorlogix.

 

"Weather is the cardinal influence," the analyst said.

 

The wheat markets largely shrugged off strong weekly demand news. Weekly U.S. wheat export sales, including old-crop and new-crop business, were 763,600 tonnes, above analyst expectations of 300,000 to 750,000 tonnes, according to the U.S. Department of Agriculture. Net old crop export sales were 454,200 tonnes, the USDA said.

 

 

Minneapolis Grain Exchange  

 

MGE wheat futures were seen as followers of the CBOT and KCBT, a MGE floor trader said. However, the nearby May contract found support from spreaders, he said.

 

"We were certainly passengers," the trader said.

 

There were some market participants interested in inter-market spreads, a trader said. They were trying to sell MGE December wheat against the CBOT, he said.