August 18, 2006

 

US Wheat Review on Thursday: Lower; CBOT leads retreat

 

 

U.S. wheat futures stumbled lower Thursday, extending their price correction from prior highs, with Chicago wheat leading the retreat.

 

CBOT September wheat futures ended 8 cents lower at US$3.63 1/2, September Kansas City wheat settled 5 1/2 cents lower at US$4.46 3/4 and Minneapolis September wheat ended 4 cents per bushel lower at US$4.46 3/4.

 

Speculative-led selling pressured futures to lower levels, furthering the market's correction from prior highs amid the absence strong export demand to attract buyers to the market, analysts said.

 

The trade is getting some mild export business, but not enough to be bullish, said Brian Hoops, president Midwest Market Solutions in Yanktonne, South Dakota.

 

The market has been trying to establish harvest lows, but with big longs looking to liquidate in the absence of better demand, downward pressure remains constant, Hoops added.

 

Meanwhile, weekly export sales came in near the low end of estimates and news of Egypt buying only one cargo of U.S. supplies disappointed traders, analysts added.

 

The current downward move brings a violent end to the supply side rally of 2006, with market focus shifting to demand side fundamentals, said a KCBT floor analyst. Rumors of demand continue to foster bullish hopes, but until the rumors become reality, the market is poised to drift sideways, he added.

 

Forecasts calling for rain showers to move into the winter wheat belt, helping replenish soil moisture ahead fall plantings, were seen as a defensive feature in the market as well.

 

The DTN Meteorlogix weather forecast said wheat areas in the plains are beginning to get some soil-moisture recharge ahead of the fall planting of winter wheat. The most notable area receiving the moisture is from the northern Texas Panhandle through western, central and northern Kansas. There is still much more rainfall needed, however, to ease the soil moisture deficits in the region, Meteorlogix reports.

 

In CBOT pit trades, speculative fund selling was estimated between 1,000 and 2,000 lots. Prudential Financial and Iowa Grain each sold 1,000 December, JP Morgan sold 1,500 December and Fimat sold 1,400 December.

 

Prudential Financial bought 2,000 December, O'Connor bought 1,500 December and Calyon Financial bought 1,000 December.

 

 

KANSAS CITY BOARD OF TRADE

 

KCBT wheat stumbled lower, continuing its price correction, but scale-down commercial buying near the lows did provide stability to underpin prices down the stretch, analysts said.

 

In pit trades, FCStonnee and Fimat were featured sellers, with UBS Securities and Frontier Futures were key buyers.

 

 

MINNEAPOLIS GRAIN EXCHANGE

 

MGE was a follower of Chicago and Kansas City wheat Thursday, a MGE trader said. Commercial and speculative fund selling near US$4.46 basis September and US$4.57 basis December helped extend the losses, traders added. Meanwhile, most of the day's trade was termed flat price action, with inter market spread bids seen wider than current market prices, a floor broker added.