June 11, 2008

 

US Wheat Review on Tuesday: Markets bounce after USDA data; corn supports

 

 

Most U.S. wheat futures contracts rebounded Tuesday from the previous day's sharp losses as U.S. Department of Agriculture crop reports met trade expectations for increased production and carryout.

 

Chicago Board of Trade July wheat climbed 20 1/2 cents to US$8.09 per bushel. Kansas City Board of Trade July wheat jumped 21 cents to US$8.46 1/2, and Minneapolis Grain Exchange July wheat stumbled 10 cents to US$9.86.

 

It seemed as though the markets showcased a "sell the rumor, buy the fact" scenario after selling off Monday ahead of the USDA's June supply/demand and winter wheat production reports, said Mike Zuzolo, analyst for Risk Management Commodities. The reports, as expected, projected bearish increases in U.S. 2008 all winter wheat output and in old- and new-crop ending stocks.

 

The USDA raised its forecast for all winter wheat production to 1.817 billion bushels from 1.778 billion projected in May. U.S. 2008-09 wheat carryout was pegged at 487 million bushels, up from 483 million last month.

 

Spillover strength from gains in CBOT corn also was seen as supportive for wheat, with July corn hitting a record US$6.74 shortly before the closing bell. Commodity funds bought an estimated 3,000 wheat contracts at the CBOT.

 

"I don't see any fundamental reason on today's report why you would have this move up," Zuzolo said.

 

The market could see another round of technical buying after bulls pushed CBOT July wheat above its 200-day moving average around US$8.07, Zuzolo said. The move opens up the possibility for "a technically led counter-seasonal harvest rally," he said.

 

Harvest of soft red winter wheat, traded at the CBOT, is underway in southern U.S. states and should start by the end of the week in extreme southern Illinois, agronomists said. Harvest activity is typically seen as bearish because it brings new supplies online.

 

 

Kansas City Board of Trade

 

KCBT wheat futures rose as the market rebounded from Monday's selloff amid sentiment the pre-report setback was overdone, a floor trader said. The market found support from gains in CBOT corn, even though USDA data for wheat was considered "neutral," he said.

 

Severe weather suspended wheat cutting in Kansas just as it was starting in south-central areas of the state, according to Kansas Wheat, a growers' group. The harvest should be in full swing next week, assuming conditions stay dry, it said.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures closed mostly higher, with the market "trying to follow corn in Chicago," a floor trader said. MGE July wheat came under pressure from some flat-price selling, he said.

 

The also was some bull spreading noted. Prudential was seen buying nearby July and selling December, a MGE trader said.