August 25, 2006

 

US Wheat Review on Thursday: End up on tech buys, world supply concerns

 

 

U.S. wheat futures ended Thursday's session posting solid gains on world supply concerns and technically motivated buying, continuing their rebound from prior lows.

 

CBOT December wheat futures ended 8 3/4 cents higher at US$3.95 3/4, December Kansas City wheat settled 8 cents higher at US$4.75 1/4 and Minneapolis December wheat ended 6 3/4 cents per bushel higher at US$4.57 3/4.

 

Lower world production estimates, with the International Grains Council trimming global production by 3 million tonnes, coupled with concerns over dryness in Australia and Argentina provided the fundamental spark for the markets gains, analysts said.

 

The market has had to focus its attention on the southern hemisphere as crop problems in the U.S. and overseas have increased the need for favorable yields in Argentina and Australia, said Tanner Ehmke, an analyst with AgResource Co. in Chicago. However, dryness issues have raised concerns that southern hemisphere crops aren't performing well, Ehmke added.

 

Firm cash prices, with U.S. values attempting to catch up with world prices added support to futures, with lingering talk of Brazil looking for U.S. soft wheat providing some lingering support as well.

 

Nevertheless, some analysts say the price bounce was more technical in nature, with the exhaustion of speculative fund selling enabling futures to produce an overdue technical bounce.

 

Meanwhile, light support was generated from French wheat climbing to contract highs overnight and outlooks for a possible reduction in Canadian production in Friday's StatsCanada report, traders added.

 

In other news, the International Grains Council now forecasts 2006-07 world wheat output at 593 million metric tonnes, a drop of 3 million tonnes from last month's forecast and off 25 million tonnes from last year's estimated harvest.

 

Meanwhile, the DTN Meteorlogix forecast said dry weather continues to be a main feature of conditions in South America. In Argentina, concern is building regarding winter wheat production in the main wheat areas of southern Buenos Aires and La Pampa provinces because of persistent dryness. This is similar to the conditions that the U.S. southern Plains endured during the final stages of the winter wheat growing and developing cycle this year. Very little rainfall is in store for South America during the next five days, which will add to the stressful situation, Meteorlogix reports.

 

In CBOT pit trades, ABN Amro bought 2,000 December, Citigroup bought 1,500 December, JP Morgan bought 900 December, and FCStonnee, Calyon Financial and Man Financial each bought 500 December. Speculative fund buying was estimated near 8,000 contracts. O'Connor sold 700 December, with Man Financial a seller of 300 December and 300 July.

 

 

KANSAS CITY BOARD OF TRADE

 

KCBT wheat futures climbed higher in unison with Chicago, as rising concerns over world production and supplies attracted speculative buying. The most active December futures finished at a two-week high, with technically motivated buying aiding the price strength, traders said.

 

 

MINNEAPOLIS GRAIN EXCHANGE

 

MGE wheat futures followed the lead of Chicago and Kansas City, climbing in unison with the rest of the U.S. wheat complex. However, the market continued to lose ground to CBOT and KCBT wheat on inter-market spreading, traders said.