August 18, 2007

 

US Wheat Review on Friday: Finishes mixed as traders take a breather

 

 

U.S. wheat futures rebounded from heavy losses to finish mixed Friday as many traders took a breather after a week of volatile price action, analysts said.

 

Chicago Board of Trade September wheat finished 1 cent lower at US$6.72 per bushel, up 5 cents on the week. CBOT December wheat ended 1 cent higher at US$6.88 1/2, up 4 cents on the week.

 

Kansas City Board of Trade September wheat settled 1/4 cent lower at US$6.50 1/2, down 4 cents on the week. KCBT December wheat finished flat at US$6.64, down 5 cents on the week.

 

Minneapolis Grain Exchange September wheat closed 2 3/4 cents lower at US$6.52 1/4, down 11 3/4 cents on the week. MGE December wheat ended 3 cents lower at US$6.57 1/2, down 6 cents on the week.

 

Volume was relatively thin, with many market participants seen taking a step back after global economic jitters Thursday triggered a broad-based liquidation in commodities markets, analysts said. Traders needed to catch their breath following the sell-off and a jump to fresh 11-year highs earlier in the week, a CBOT floor broker said.

 

Wheat futures opened mixed but quickly turned to the downside. Goldenberg Hehmeyer sold estimated 1,200 CBOT December wheat in early activity, setting a weaker tonnee for the markets, a trader said.

 

Prices moved into positive territory going into the close. The session low for CBOT December wheat was US$6.75 1/2, and the session high was US$6.89.

 

Looking ahead, a close below US$6.74 for CBOT December wheat could spark technical selling and create the potential for dropping back near US$6.20, said Joe Victor, vice president of marketing for Allendale. A strong upward technical trend has been in place above US$6.74 at least since the beginning of June, he said.

 

The contract has "every right to hold its upward trend" amid robust demand for U.S. wheat and historically tight global ending stocks, Victor said. As of Aug. 9, the U.S. had total wheat sales commitments of 524.5 million bushels, up from 281.7 million at the same time last year, according to the U.S. Department of Agriculture.

 

Unfavorable weather has reduced production in traditional exporting countries, including the E.U. and Ukraine, and limited their ability export.

 

"The fundamentals are so strong," Victor said. "I just can't get over how strong demand is for U.S. wheat."

 

There are also supportive concerns about production potential in the Southern Hemisphere. Areas of Australia and Argentina need more rain, forecasters said.

 

A few significant showers were reported in New South Wales and Queensland in Australia during the past 24 hours but with low coverage. Higher coverage showers are possible during the weekend but mostly for southeast Queensland, according to DTN Meteorlogix.

 

"I've got a yellow warning light on in Queensland and New South Wales," Victor said.

 

 

Kansas City Board of Trade

 

Stabilization of outside financial markets eliminated a negative influence on U.S. wheat, but long technical liquidation and fund selling pressured prices early, a KCBT floor trader said. Prices trimmed losses on bargain buying and position-evening, he said.

 

Along with parts of Australia, some Argentine growing areas are also in need of moisture, an analyst said. However, there is no significant rainfall in sight for La Pampa or Buenos Aires wheat areas, Meteorlogix said.

 

Argentina's Agriculture Secretariat said Friday in its weekly crop report that dry weather continues to slow development of the young wheat crop. The Secretariat trimmed its 2007-08 wheat-planting area estimate to 5.5 million hectares, down from 5.55 million hectares last month, due to a lack of rain in the southern areas of Buenos Aires and La Pampa provinces and the northern provinces of Chaco, Tucuman and Santiago del Estero.

 

"The problems for wheat from this point forward will circle around the Southern Hemisphere crops," said Roy Huckabay, analyst with the Linn Group. "Right now, there's a very heavy dependence on (Argentina and Australia) to have very good crops."

 

 

Minneapolis Grain Exchange

 

Potent thunderstorms are expected to hit the western Dakotas on Friday and slide eastward overnight, slowing a portion of spring wheat harvesting, T-Storm Weather said in a forecast. An active storm pattern should occur again early next week with several rounds of thunderstorms expected as heat and coolness fluctuate across the Northern Plains, T-Storm predicted.

 

London- and Paris-based Liffe wheat futures didn't provide much direction for U.S. wheat as the European markets finished mostly steady to slightly lower, an analyst said. There was a little profit-taking in the European markets, but consumers were buying the dips, an E.U. grain broker said.

 

Reports from major grain analysis groups indicate that Europe's wheat harvest is winding down, according to Meteorlogix. Rain delayed cutting this season.