May 3, 2008

 

US Wheat Review on Friday: Rallies on technical bounce

 

 

U.S wheat futures closed up across the board Friday, as a technical bounce eased oversold conditions, a CBOT floor trader said.

 

Chicago Board of Trade July wheat added 19 cents to US$8.09 per bushel. Kansas City Board of Trade July wheat added 21 3/4 cents to US$8.61 1/4, and Minneapolis Grain Exchange July wheat jumped 21 cents to US$9.57.

 

The rally capped a sell-off this week that pushed CBOT July wheat below US$8 for the fist time since January. The contract has seen a mostly downward trend since hitting a 2008 high of US$12.72 3/4 on March 13.

 

CBOT July wheat bounced back a little after slipping below the 200-day moving average Thursday, a CBOT floor trader said.

 

Commodity funds bought an estimated 3,000 contracts at the CBOT.

 

Kansas City Board of Trade

 

Private analytical firm Informa Economics on Friday estimated 2008 U.S. winter wheat production will total 1.747 billion bushels, up from 1.516 billion last year, traders said. Informa pegged hard red winter wheat production at 990 million bushels, traders said. In 2007, U.S. farmers produced 961.588 million bushels of HRW wheat, used to make bread, according to the U.S. Department of Agriculture.

 

A trader said the markets shrugged off the bearish forecast, seemingly more interested in technical adjustments to downside price movements earlier in the week. One trader suggested the markets may be pricing in a freeze-damage premium.

 

Frost or a light freeze should be widespread in Kansas, Nebraska and Colorado this weekend, with a hard freeze possible in Colorado and western Nebraska, said DTN Meteorlogix. The freeze forecast doesn't pose a real threat to the crop, but traders and analysts concurred that "you never know for sure."

 

Minneapolis Grain Exchange

 

Floor chatter in Minneapolis on Friday centered on spring wheat planting delays and the cold weather forecast for Kansas this weekend, a MGE floor trader said. After taking wheat down to "fairly dramatic" levels earlier in the week, the trader said the markets were giving a little back heading into the weekend.

 

"It's kind of an underwhelming bounce," the trader added. "If it's real, we have some options play and we didn't see that."