August 1, 2006
US Wheat Review on Monday: Higher on demand talk, technicals
U.S. wheat futures closed at nearly one-week highs Monday, supported by reports that China and India will be looking for high-quality milling wheat, concerns that crop ratings will decline in the weekly crop progress report and on a technical bounce from recent lows.
Chicago Board of Trade September gained 9 cents to US$3.97 1/2 and December finished 8 1/2 cents higher at US$4.16 1/2. Kansas City Board of Trade September rose 8 3/4 cents to US$4.92 3/4 and December rose 5 1/2 cents to US$5.05 1/2. Minneapolis Grain Exchange September gained 8 cents to US$4.86 and December rose 7 3/4 cents to US$4.94 3/4.
Large speculators "have done enough on the short side of the market and have no need to keep on hammering this," said Jack Scoville, analyst and vice president at Price Futures Group in Chicago, explaining the price bounce off of recent lows.
Specs had sold the market heavily last week, and prices are now rebounding from oversold conditions, he added.
Reports that China and India will be looking to buy a respective 1 million metric tonnes and 4 million tonnes of high-quality milling wheat in the year to June 2007 were also supportive, analysts said.
The news reportedly came out of an interview with an analyst from U.S. Wheat Associates, who made the comments on the sidelines of a regional grains conference.
Sid Love, analyst at Kropf & Love Consulting in Overland Park, Kan., said, however, that the report was nothing new and simply reflects estimates the U.S. Department of Agriculture made in its July supply and demand reports.
Meanwhile, hot, dry conditions continue on the Plains, which are expected to further deteriorate hard red spring crop conditions. Crop maturity is ahead of normal due to the drought, however, and the harvest is expected to begin in some areas, sources said.
"It's going to be a high-protein crop but probably not a lot of it," Scoville says. In addition, if drought continues on the southern Plains, conditions for planting next year's crop could be much less than ideal.
Funds were even buyers and sellers on the day. Calyon Financial and Iowa Grain each bought 400 Sep, and J.P. Morgan and Prudential Financial each bought 200 Sep. ABN Amro sold 1,000 Sep, Citigroup Global Markets sold 500 Sep, Man Financial 300 Sep and Rosenthal-Collins sold 200 Sep.
CBOT September wheat hit a high of US$3.99 a bushel - its best price in nearly a week - and settled near the day's high. The contract found technical resistance, however, at the 20-day moving average near US$3.99.
The ability of September to clear the 10-day and 40-day moving averages during the session spawned technical strength and attracted further buying to the market.
KANSAS CITY BOARD OF TRADE
KCBT wheat futures gained in a light volume session, supported by strength in Chicago and in a technical bounce from recent lows.
September wheat traveled to a four-session top of US$4.94 and settled 1 1/4 cents off the high.
Technical resistance is found overhead at the US$4.95 40-day moving average, then near the US$5 20-day moving average. Near-term support is uncovered at the US$4.86 session low, then at the US$4.81 double-bottom low from last week.
Man Financial bought 400 Dec, FCStonnee bought 500 December, Fimat bought 600 September and 300 December.
ADM sold 300 December and Man Financial sold a net 300 September.
MINNEAPOLIS GRAIN EXCHANGE
MGE wheat futures gained on the technical strength of the markets and ongoing concerns over the drought-reduced HRS crop. The USDA will issue its latest crop condition report at 4 p.m. EDT.
The HRS crop tour last week found an average yield of 31.7 bushels per acre, versus a 2005 tour average of 35.5 bushels. The durum yield was pegged at 23.3 bushels, versus 29.6 bushels the previous year.
September wheat hit a four-session high of US$4.87 and settled just 1 cent off of the high. Technical strength developed after the market pierced the US$4.82 1/2 40-day moving average.
