June 3, 2008

 

US Wheat Review on Monday: Solid gains on short covering, fresh speculative buys

 

 

U.S. wheat futures prices closed solidly higher and nearer their daily highs Monday.

 

Short covering and speculative bargain-hunting buying were featured in the wheat pits, said analysts. Strong gains in corn and higher soy complex futures prices also spilled over into the wheat pit, they said.

 

July Chicago wheat futures closed up 21 3/4 cents at US$7.83 1/4. Kansas City July wheat futures finished up 21 cents at US$8.23 a bushel and July Minneapolis wheat was down 20 cents at US$10.35 a bushel.

 

Monday's price gains "were nothing more than a short-covering rally," said Howard Kathol, the director of marketing plans with Midwest Market Solutions. He said there are no significant problems with harvesting the hard red winter crop and that the U.S. soft red winter wheat crop "looks great."

 

Weather in the U.S. central and southern Plains wheat regions is expected to be mostly dry to start the week. There will be a few widely scattered showers in the south, with showers and thunderstorms across Kansas and southern Nebraska. Temperatures will range from 80 to 98 degrees.

 

The first trading day of the month found fresh speculative buying interest entering the wheat futures pits.

 

The key "outside markets" were in a bullish posture for grains during most of the trading session on Monday, said Brian Grete, senior market analyst the the Pro Farmer advisory service. Crude oil and gold were higher and the U.S. dollar was steady to weaker.

 

Dow Jones Newswires reported overnight that Russia's wheat harvest this year will exceed 50 million metric tonnes, which is 10% above the 2007 production, according to the Russian ag ministry. Meantime, Dow Jones Newswires also reported China wheat production is likely to reach a record high level in 2008, according to the country's ministry of agriculture.

 

Reports overnight said Saudi Arabia, which is typically self sufficient on wheat, is likely to start importing the grain in the third quarter of this year, according to wheat traders in the country. The effort will reportedly be to increase domestic stocks and stabilize domestic wheat prices.

 

The latest Commodity Futures Trading Commission commitments of traders report, issued Friday afternoon, shows commercial traders in Chicago soft red winter wheat futures reduced their net short positions by 10,490 contracts, while increasing their net long positions by 1,590 contracts. Meantime, the index fund traders of Chicago wheat reduced their net long positions by 1,490 contracts and also reduced their net short positions by 1,141 contracts.

 

 

KANSAS CITY BOARD OF TRADE

 

Short covering as also the feature in the hard red winter wheat futures trading pit in Kansas City.

 

The commitments of traders report, issued Friday afternoon, showed commercial traders in Kansas City hard red winter wheat futures increased their net short positions by 886 contracts, while also increasing their net long positions by 376 contracts. Meantime, the index fund traders of Kansas City wheat increased their net long positions by 247 contracts and also increased their net short positions by 601 contracts.

 

 

MINNEAPOLIS GRAIN EXCHANGE

 

The hard red spring wheat market finished down amid profit-taking pressure. July wheat has been in an uptrend for four weeks. There is some strong overhead chart resistance at the May high of US$10.80, said a market technician. Solid technical support is located at US$10.00.