US Wheat Review on Monday: Jumps on short-covering, positioning

 

 

U.S. wheat futures jumped Monday in a rebound fueled by short-covering and positioning ahead of the release of U.S. Department of Agriculture crop data.

 

Chicago Board of Trade September wheat closed 28 1/2 cents higher at US$7.93 3/4 per bushel. Kansas City Board of Trade September wheat jumped 21 1/4 cents to US$8.25, and Minneapolis Grain Exchange September wheat rose 23 3/4 cents at US$8.81 3/4.

 

The markets bounced back from a sharp sell-off Friday, with corn and soybeans also trading higher for most of the day session. The lack of pressure from the row crops allowed wheat to climb, as weakness in the row crops has kept a lid on wheat recently, an analyst said.

 

Commodity funds bought an estimated 3,000 contracts at the CBOT.

 

World demand for wheat remains supportive, along with seasonal factors, such as the end of the U.S. winter wheat harvest, said Doug Houghtonne, analyst for Brock Associates. There are ideas the markets may have put in a seasonal bottom, although a collapse in crude oil or renewed fund liquidation could hit the grains down the road, he said.

 

"Fundamentally, I can't see a huge upside," Houghtonne said. "We're probably going to stay somewhere below June highs. I don't see any particularly fundamental news behind this rally."

 

CBOT September wheat hit a high of US$9.71 in June.

 

Activity in wheat remained volatile, after prices ended near limit-up Thursday and near limit-down Friday. The extreme volatility could drive some participants out of the market if it continues, Houghtonne said.

 

"It's been trading in a different direction each day," he said about wheat.

 

 

Kansas City Board of Trade

 

KCBT wheat felt support from technical buying. Traders are waiting for the USDA to issue crop reports at 8:30 a.m. EDT Tuesday.

 

No major surprises are expected for wheat in the USDA data. Row crops are in the spotlight, with hotly-anticipated forecasts due out on production and yield.

 

The average of analysts' estimates for 2008-09 U.S. all wheat production was 2.459 billion bushels, down from the USDA's July estimate of 2.461 billion, according to a Dow Jones Newswires survey of 14 analysts. The average of analysts' estimates for all winter wheat production was 1.873 billion bushels, up from the USDA's July estimate of 1.864 billion.

 

"We could see possibly a further bounce up in winter wheat because everybody talked about pretty good yields up in northern Plains areas," Houghtonne said. "I think overall the harvest weather has been very good."

 

 

Minneapolis Grain Exchange

 

Traders are uncertain how the USDA will adjust its estimates for spring wheat production. The crop struggled in western areas of North Dakota due to hot, dry weather, while the east benefited from more rain.

 

"The conditions are kind of spotty," Houghtonne said about spring wheat. "It could go up a bit. It could go down a bit."

 

The average of analysts' estimates for spring wheat other than durum is 510 million bushels, up slightly from the USDA's July estimate of 507 million. The average of analysts' estimates for durum production was 84 million bushels, down from the USDA's July estimate of 90 million.