August 12, 2006

 

US Wheat Review on Friday: Backpedals on speculative sales; lacked support

 

 

U.S. wheat futures backpedaled to double digit losses Friday, plunging lower on speculative fund sales amid the absence of supportive news to offset the bearish sentiment moving through grain markets.

 

CBOT September wheat futures ended 12 2/3-cents lower at US$3.73 3/4, September Kansas City wheat settled 15 cents lower at US$4.54 1/4 and Minneapolis September wheat ended 15 1/4 cents per bushel lower at US$4.57.

 

The theme was consistent from the outset, with bearish U.S. production outlooks, a lack of new demand news and weakness in other markets attracted fund liquidation, sending buyers running to the sidelines, said Shawn McCambridge, senior grains analyst with Prudential Financial in Chicago.

 

The market is shifting its focus to the pace of demand and without any confirmed export business to foster bullish thoughts, prices easily fell into sell stops resting beneath prices, analysts said.

 

The trend was consistent across all U.S. wheat futures markets, with early selling pressure eroding underlying support to accelerate the declines.

 

Long liquidation was the name of the day's game, as the market's need to be fed some bullish news amid the build up of longs in the market paved the way for the declines, analysts added.

 

Big long positions have been held in Kansas City and Minneapolis wheat for about a year, so its easy to see the markets shake some longs loose as futures activated sell stop orders once underlying support levels were breached, added McCambridge.

 

Spillover pressure from corn aided the lower theme, with supportive world balance sheet projections quickly pushed to the side, analysts said.

 

Meanwhile, the DTN Meteorlogix Weather forecast said conditions in the U.S. plains will remain under the influence of subtropical high pressure, with hot and dry conditions going through the weekend into next week. More rain is needed, particularly in the southern Plains, for soil moisture recharge; even so, there will be very few opportunities for this to occur, Meteorlogix added.

 

In CBOT pit trades, O'Connor bought 600 December, Citigroup bought 400 December and 300 September, with Iowa Grain and Rosenthal each buyers of 400 September. Man Financial sold 800 September, Calyon sold 500 September, JP Morgan sold 400 December and O'Connor sold 300 September. Speculative fund selling was estimated between 3,000 and 4,000 contracts.

 

 

KANSAS CITY BOARD OF TRADE

 

Featured players included JP Morgan buying 200 September, 500 December. Prudential bought 200 December and 500 September. UBS Securities bought 200 December.

 

Fimat sold 500 December, Man Financial sold 500 December, and Frontier Futures sold 400 December. JP Morgan was a seller of 500 December, and 400 September. Prudential sold 500 December, and UBS Securities sold 300 December.

 

In spread-related trade, UBS Securities traded 300 December/March wheat at 8 cents.