August 3, 2006

 

US Wheat Review on Wednesday: Spillover, tech rebound supports prices

 

 

U.S. wheat futures rose Wednesday, led by the soft red market on the Chicago Board of Trade, as prices rebounded technically from recent losses and attracted speculative buying interest.

 

CBOT September wheat settled 9 cents higher at US$4.01 1/2, and December gained 8 1/4 cents to US$4.21 1/2 a bushel.

 

"We thought that the selling was overdone yesterday (Tuesday). Then we saw some spillover from corn and beans," said Brian Hoops, senior market analyst and president of Midwest Market Solutions in Yanktonne, S.D.

 

Strong corn and soybean futures, which rose on forecasts for continued hot and dry weather over the Midwest, spilled over into the wheat pit and boosted prices.

 

There are also ideas in the market that prices may be forming seasonal lows this week, and traders are now turning around and buying wheat now that the winter wheat harvest is essentially finished and the spring harvest is accelerating.

 

Another theory is that the large index funds sometimes buy these markets in lieu of the fundamentals of a large SRW crop, and the Chicago market may be benefiting from that effect, a source said.

 

Spread trading among the three markets was cited earlier in the day as putting light pressure on Kansas City and floating moderate gains in Chicago and Minneapolis. The effect lessened, however, by the closing bell, as Kansas City prices turned higher.

 

The U.S. Department of Agriculture is scheduled to issue weekly export sales Thursday at 8:30 a.m. EDT. Trade estimates range from 350,000 to 550,000 metric tonnes, versus 464,700 tonnes the previous week.

 

Trade at the CBOT was light, though funds were net buyers of 600 contracts as of 1:30 p.m. EDT, thus supporting prices.

 

R.J. O'Brien bought 300 September, J.P. Morgan bought 200 September and Man Financial bought a net 100 September. Fimat sold a net 600 September and O'Connor sold 200 September.

 

Calyon Financial spread 1,500 December/September contracts at 20 cents.

 

CBOT September wheat rose a US$4.03 1/2 session high on the buying strength and the US$4.01 1/2 settlement was its strongest in one week.

 

 

KANSAS CITY BOARD OF TRADE

 

KCBT wheat futures transited both sides of unchanged, as sell stops pressured prices in early trade. Buying interest picked up later, however, as Chicago wheat made new session highs.

 

Prudential Financial was an early seller of 1,500 September, while ADM bought 600 September, 200 each of December and July and 200 July 2007 contracts. J.P. Morgan sold 200 September and 500 December.

 

Fimat spread 100 December/September contracts at 15 cents.

 

KCBT September rose 3 1/4 cents to US$4.85 1/4 and December gained 4 3/4 cents to US$5.01 3/4.

 

 

MINNEAPOLIS GRAIN EXCHANGE

 

MGE wheat futures rose, supported by the gains in Chicago and on ideas that Tuesday's sharp losses were overdone.

 

Spring wheat prices may be forming seasonal harvest lows this week, and traders may be turning around and buying the market after hitting fresh five-week lows in the morning. The harvest should be 30%-40% complete by Sunday, Hoops said.

 

Commercial buying may also pick up in Minneapolis on concerns over a small U.S. crop and dryness in Canada, he added.

 

MGE September wheat gained 4 1/2 cents to US$4.73 and December rose 5 1/4 cents to US$4.85 1/4.