June 14, 2007

 

US Wheat Review on Wednesday: Soars on technical buying, US HRW wheat fears

 

 

U.S. wheat futures Wednesday rallied to new contract highs and fresh 11-year highs for front-month contracts on technical buying and worries about crop damage, analysts said.

 

Chicago Board of Trade July wheat climbed 24 1/2 cents to US$5.89 1/2 per bushel, Kansas City Board of Trade July wheat rose 29 1/2 cents to US$5.88 1/2, and Minneapolis Grain Exchange July wheat closed 19 cents higher at US$5.81.

 

Nearby contracts went limit up, or 30 cents higher, at CBOT and KCBT. CBOT July wheat set a new contract high of US$5.95 per bushel, exceeding the previous high of US$5.76 set Tuesday. CBOT September wheat closed at US$6.05 and set a new contract high of US$6.10, exceeding the previous high of US$5.90 1/2.

 

Wheat futures have strong technical momentum after setting new contract highs and reaching historic prices, analysts said.

 

There is also not much technical resistance in the elevated price levels, added Doug Houghton, analyst with Brock Associates.

 

Concerns about production problems amid tight global stocks also remained supportive, traders said. Severe drought in Ukraine and Russia is impacting production, and there are concerns about dryness in Argentina, central China and western Australia, they noted.

 

Major crop areas throughout northern and central China will be dry through the coming weekend, a stressful weather pattern for crops, according to DTN Meteorlogix. Australia's major wheat areas were dry Tuesday, and there is little rainfall ahead in the next five days, the weather firm said.

 

Recent wetness in the U.S. southern Plains also is unfavorable for hard red winter wheat maturation and harvest. The U.S. Department of Agriculture this week cut its estimate for 2007-08 global carryout from May and pegged stocks at a 30-year low.

 

"With world wheat supplies historically tight, the market's just getting really nervous about the supply situation," Houghton said. "Any problems with the crop, like heavy rains in the southern Plains, are just making it very nervous."

 

Wheat is now technically overbought and due for some profit-taking, analysts said. Trading is expected to remain volatile amid the tight world stocks situation and production threats, they added.

 

  

Kansas City Board of Trade

 

KCBT wheat futures led the upside, as the July contact hit limit up before CBOT July wheat, traders said. KCBT July wheat reached a new contract high of US$5.89, exceeding the previous high of US$5.71 set Tuesday.

 

Technical buying shoved prices higher after KCBT July wheat set a fresh 11-year high for the front-month contract, traders said. There was fundamental support from concerns about harvest delays and crop damage from recent heavy precipitation, they added. 
 

"Wheat harvest, already behind schedule in the southern Plains, has more rain ahead to finish out this week," Meteorlogix said.

 

Thunderstorms with up to 1 1/2 inches of rain will cover the southern Plains Wednesday and Thursday, the weather firm said. Additional thunderstorms are possible in the south on Friday, notably in Oklahoma through north-central Texas.

 

"This rainfall pattern continues through the weekend," Meteorlogix said. "Harvest will be delayed as a result of the continued rainfall pattern."

 

  

Minneapolis Grain Exchange

 

MGE July wheat set a new contract high of US$5.85, exceeding the previous high of US$5.72. The story was the same as at the CBOT and KCBT, with technical buying pushing prices higher, a MGE floor trader said.

 

KCBT wheat appeared to be the leader, and there was also support from late gains in CBOT corn, he added.