May 28, 2008

 

US Wheat Review on Tuesday: Rises on technical buying, Australia worries

 

 

U.S. wheat futures jumped Tuesday on technical buying after recent losses and on concerns about the potential for another damaging drought in Australia.

 

Chicago Board of Trade July wheat gained 6 1/2 cents to US$7.59 per bushel. Kansas City Board of Trade July wheat rose 7 1/4 cents to US$8.05, and Minneapolis Grain Exchange July wheat climbed 15 cents to US$10.45.

 

Holders of short, or sold, positions likely started booking some profits in the last week of the month, said Dave Marshall, a commodities broker and marketing advisor.

 

"We've got wheat that's been in a pretty persistent downtrend since the end of February," he said.

 

There also may have been some unwinding of inter-commodity spreads by traders who were short wheat and long CBOT corn or soybeans, Marshall said. Corn and soybeans ended in negative territory.

 

Commodity funds bought an estimated 2,000 wheat contracts at the CBOT.

 

In Australia, the wheat crop outlook "does not have the same promise as indicated earlier in the season," DTN Meteorlogix said. Rabobank lowered its estimate for wheat production Down Under to 20 million and 24 million metric tonnes, down from 23 million to 26 million tonnes last month.

 

Weekend wetness in soft red winter wheat areas of the Delta and eastern Midwest was seen adding some underlying support, a trader said.

 

 

Kansas City Board of Trade

 

The move higher at the KCBT was not sustained by any heavy buying, a floor trader said. The market bounced after recent weakness and amid the worries about Australia's crop, he said.

 

The dryness in Australia's eastern areas "leads to people wondering whether three straight years of drought is possible," Marshall said. Extreme drought has lowered Australia's wheat output and export potential for the past two years.

 

"They're not out of the woods yet it would appear," a broker said about Australia.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures followed gains in CBOT and KCBT wheat, a floor trader said. Activity was "dead" in the pit, he said.

 

Spring wheat areas of the Northern Plains and Canadian Prairie remained under the influence of a pervasive cold-weather pattern, Meteorlogix said. Frost and light freeze conditions Tuesday morning should slow growth of spring wheat, but a more active rainfall pattern should help wheat recover, the private weather firm said.