US Wheat Review on Tuesday: Jumps on spread unwinding, short-covering

 

 

U.S. wheat futures jumped Tuesday on short-covering and spread unwinding, despite the bearish influence of the progressing U.S. harvest.

 

Chicago Board of Trade September wheat gained 3 3/4 cents to US$8.88 per bushel. Kansas City Board of Trade September wheat climbed 11 cents to US$9.24 3/4, and Minneapolis Grain Exchange September wheat rose 3 3/4 cents to US$9.67 3/4.

 

Wheat's strength was somewhat surprising considering that the U.S. winter wheat harvest is expected to pick up speed after a slow start, traders said. Wheat also finished firmer in the face of a sell-off in CBOT corn, which has been the leader of the grains lately.

 

It seemed as though wheat found support from the unwinding of some long corn/short wheat spreads, said Dale Durchholz, analyst for AgriVisor. September corn ended down 11 3/4 cents at US$7.27.

 

There was some bullish market chatter about continued harvest delays for wheat. The U.S. winter wheat harvest was 22% complete as of Sunday, 10 percentage points below average, according to the U.S. Department of Agriculture.

 

"When I step back from the fray and look at it, the spread game is probably the bigger argument," Durchholz said. "Other than that, there isn't too much."

 

Commodity funds bought an estimated 1,000 contracts at the CBOT.

 

After the close of trading, Egypt's state-owned General Authority for Supply Commodities said it would tender Wednesday to buy at least 55,000 to 60,000 metric tonnes of wheat for shipment July 20-31. The results of the tender should help give the markets direction, traders said.

 

The U.S. is expected to face stiff competition again from the Black Sea region. Last weekend, GASC bought 90,000 tonnes of Russian wheat in a tender.

 

 

Kansas City Board of Trade

 

Unwinding of wheat/corn spreads seemed to support the gains in wheat, a KCBT trader said. The market's feature was positions rolling to September from July ahead of first notice day Monday, a trader said.

 

Open interest in KCBT July was 28,026 contracts as of the Tuesday's close, which was higher than usual, a trader said. Traders may have delayed rolling contracts from the July amid ideas that the delayed harvest would spark a rally in the nearby contract, he said.

 

Harvesting of hard red winter wheat should accelerate through next week as the U.S. central and southern Plains heat up, T-Storm Weather said. Above-average warmth is expected in the region, with a "full-blown heat wave increasingly likely for next week," the private weather firm said.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures played the role of follower, tracking activity at the CBOT, a floor trader said. There was no strong fundamental reason for the market's gains, as the USDA said the condition of the spring wheat crop improved in the week ending Sunday, he said.

 

Statistics Canada estimated 2008 all-wheat plantings will total 25.099 million acres, which was seen as neutral for U.S. wheat futures, an analyst said. The estimate didn't impact the market as it was basically unchanged from Statistics Canada's March forecast of 25.109 million, he said.