May 16, 2008

 

US Wheat Review on Thursday: Closes mostly up on 'vacuum' of sellers

 

 

U.S. wheat futures closed mostly higher Thursday as sellers stepped back after pushing the markets below key technical averages Wednesday, analysts said.

 

Chicago Board of Trade July wheat jumped 7 1/2 cents to US$7.71 1/2 per bushel. Kansas City Board of Trade July wheat rose 10 1/2 cents to US$8.21 1/2, and Minneapolis Grain Exchange July wheat fell 31 cents to US$10.07.

 

It seemed as though wheat had "just outright run out of sellers" after CBOT and KCBT July wheat tumbled below their 200-day moving averages Wednesday, said Mike Zuzolo, analyst for Risk Management Commodities.

 

"I think we're kind of seeing a vacuum in the market, and the trade has run out of sellers," Zuzolo said.

 

It was encouraging that CBOT wheat was able to "ignore the big break in rice and the pressure the row crops faced, and instead go back to positive territory as we closed out the day," Zuzolo said. CBOT July rice fell the daily, exchange-imposed limit for the third consecutive day, while soybeans closed lower and corn ended modestly firmer after shaking off earlier losses.

 

Resistance for CBOT July wheat is at 7.88, and major support is at 7.63, Allendale said in a note to clients. The firm said it is "technically bearish to KCBT and CBOT wheat and is a willing seller against technical resistance."

 

Commodity funds sold an estimated 2,000 contacts at the CBOT.

 

 

Kansas City Board of Trade

 

Traders might take a pause from pushing the downside much until they learn more about yields in the first states to harvest winter wheat, Zuzolo said. Although the world expects to harvest a bumped crop in 2008-09, ending stocks remain tight, he said.

 

Initial reports on the Texas wheat harvest suggests that the protein levels are running from 12% to 13%, according to a market comment from Allendale. Commercials had anticipated slightly better protein levels from Texas and remain guarded as to the quality of wheat more so from Oklahoma and Kansas, the research firm said. However, farmers in the harvesting region of Texas were expecting lesser protein levels.

 

 

Minneapolis Grain Exchange

 

MGE July wheat bucked the trend Thursday and closed sharply lower. The contract pulled back after climbing earlier in the week on bull spreading, despite weakness in CBOT and KCBT wheat.

 

It seems as though MGE bull spreading has run out of steam for now, traders said. Spreaders earlier this week were seen buying July and selling September.

 

"As the buying of July dried up, the selling of the deferreds kind of dried up," a MGE floor trader said.

 

The July/September spread came in to a low of about US$1.20 Thursday after widening out to a high of US$2.25 Wednesday, the MGE trader said. MGE September wheat closed up 9 cents at US$8.72.