US Wheat Review on Friday: Rally on technical buys, output worries

 

 

U.S. wheat futures climbed Friday, rising on bullish technical momentum and the fundamental strength of lower winter wheat production prospects and slow spring wheat plantings.

 

July CBOT wheat ended 20 3/4 cents higher at US$5.91, July KCBT wheat settled 19 1/4 cents higher at US$6.33, and July MGE wheat finished 13 1/2 cents higher at US$7.00.

 

The advances were technical in nature, particularly in Chicago wheat, as prices broke out of a sideways trading range that uncovered pre-placed buy orders, said Joe Victor, analyst with Allendale Inc., in McHenry, Ill.

 

Fundamentally, lost production in the U.S. southern plains and lagging spring wheat plantings in the northern plains remain underpinning themes supporting prices.

 

However, traders still viewed the gains as technically motivated. Despite lower production potential, ample global supplies and sluggish export demand don't project any major draw down of year-over-year inventories, Victor said.

 

Nearby CBOT July wheat climbed to a three-month high, with advances accelerating once futures eclipsed resistance at prior highs. Short covering was featured amid the heavy buildup of short positions in the market, Victor said.

 

The U.S. Department of Agriculture is expected to fine-tune its estimate for 2008-09 wheat carryout, following sluggish old-crop sales activity amid ample U.S. and global supplies, analysts said. An updated carryout and production forecast is expected in the USDA's May production and supply and demand report, due out at 8:30 a.m. EDT (1230 GMT) Tuesday.

 

The average of analysts' estimates for the 2008-09 carryout is 687 million bushels, down 9 million bushels from April. The average estimate among 12 surveyed analysts for 2009-10 ending stocks was 653 million bushels.

 

The average production estimate among 10 surveyed analysts for all winter wheat production was 1.526 billion bushels. This is down from 1.868 billion bushels in 2008, according to the USDA. The average 2009 hard red winter wheat estimate is 881 million bushels, down from 1.035 billion bushels in 2008. The average 2009 soft red winter estimate is 434 million bushels, down from 614 million bushels in 2008. The average 2009 white winter estimate is 211 million bushels, down from 219 million bushels in 2008.

 

 

Kansas City Board Of Trade

 

KCBT wheat futures spiked higher, with buyers energized by winter wheat crop concerns amid poor crop potential in the southern plains, particularly in Oklahoma and Texas. Technical buying was featured as well, traders said.

 

 

Minneapolis Grain Exchange

 

MGEX wheat climbed on buying associated with lingering planting delays in the northern plains spring wheat belt.