July 31, 2007

 

US Wheat Review on Monday: Tumbles sharply lower on profit-taking

 

 

U.S. wheat futures fell sharply Monday as investors took profits following strong gains last week, analysts said.

 

Chicago Board of Trade September wheat slipped 15 3/4 cents to US$6.37 1/2 per bushel, while CBOT December wheat finished down 12 1/4 cents at US$6.56 3/4. Kansas City Board of Trade September wheat closed down 12 cents at US$6.32, and KCBT December wheat dropped 10 3/4 cents to US$6.48. Minneapolis Grain Exchange September wheat finished 12 1/4 cents lower at US$6.33 1/4, and MGE December wheat settled 11 3/4 cents lower at US$6.45 1/2.

 

The markets were due for a pullback after wheat futures advanced last week on strong export sales and fears about crop damage from wet weather in western Europe, analysts said. Funds also sold an estimated 2,000 contracts at the CBOT going into the end of the month.

 

"This break is nothing but a normal correction in volatile trade," said John Kleist, grain analyst with Kleist Consulting. "It's not done any serious damage, except to the egos of the bulls."

 

CBOT December wheat stayed above its 10-day moving average of US$6.43 3/4, a technical analyst noted. The contract's session low was US$6.49.

 

Recent breaks have sparked buying interest from end users, and the markets will be watching to see whether that continues, Kleist said. The U.S. is considered to be the primary source of wheat for countries looking to import because other main exporters are experiencing crop troubles, analysts have said.

 

Weekly U.S. wheat export inspections were near the high end of trade estimates. The U.S. Department of Agriculture said inspections for the week ended July 26 were 17.2 million bushels, while analysts predicted sales of 13 million to 18 million.

 

Australia's wheat crop is expected to be up sharply from last year, when a severe drought cut its production in half. Australia's boosted output will help relieve global tightness and "take an awful lot of sins off the market," an analyst said.

 

In other news, non-commercial speculative funds cut CBOT long wheat futures and options positions by 138 lots and shorts by 69 lots as of July 24, the Commodity Futures Trading Commission said in a supplemental report. The funds were net long 1,213 contracts.

 

 

Kansas City Board of Trade

 

KCBT wheat futures tumbled in a technical correction to last week's gains and on ideas the market was overbought, a floor trader said. Declines in European wheat futures added to the negative tonnee, he said.

 

London-based Liffe feed wheat futures November contract ended down at GBP128/tonne, down 2% from Friday's low on profit-taking and as traders took a break from testing the recent highs. Last week, the contract hit an 11-year high of GBP135/tonne.

 

Showers brought close to one inch of rain to major European wheat areas during the past weekend, hindering ripening and harvest, according to DTN Meteorlogix. Cool, unsettled weather will continue to disrupt and delay the wheat harvest during this week, the weather firm said.

 

U.S. market participants in the coming weeks will start to look ahead to the release of the USDA's August supply/demand and crop production report, the KCBT floor trader said. As part of the report, USDA plans to resurvey Kansas and Oklahoma farmers for changes in winter wheat harvested acreage due to excessive precipitation in June.

 

Speculative funds increased long KCBT wheat futures and options positions by 3,467 lots and shorts by 392 lots, according to another CFTC supplement report. They were net long 38, 373 contracts.

 

 

Minneapolis Grain Exchange

 

U.S. Northern Plains spring wheat areas will see hot weather this week, with highs reaching the 100s Fahrenheit, Meteorlogix said. However, any yield losses have already occurred, and dry, hot weather will favor spring wheat harvest progress, the weather firm said.

 

Speculative funds decreased MGE wheat longs by 2,268 lots, shorts by 34 lots and were net long 12,631 contracts, the CFTC said.