August 26, 2006

 

US Wheat Review on Friday: Finish mixed, retreats from early gains

 

 

U.S. wheat futures ended mixed Friday, pulling back from early strength on end of the week profit taking.

 

CBOT December wheat futures ended 2 1/2 cents higher at US$3.98 1/4. December Kansas City wheat settled 2 1/4 cents lower at US$4.73, and Minneapolis December wheat ended 2 1/4 cents per bushel higher at US$4.60.

 

The market effectively built in a supportive base, with concerns over quality issues for European wheat and the uncertainty surrounding Australian and Argentine wheat crops providing fundamental strength to attract upward momentum for most of the day, analysts said.

 

The bullish enthusiasm associated with global supplies was reinforced by technicals, as futures, particularly Chicago wheat bolted through overhead resistance levels. Kansas City and Minneapolis wheat followed the lead of Chicago, with late consolidation in CBOT wheat opening the door for those markets to drift lower, analysts added.

 

Technical factors played a key role in the markets gains, as futures had come down a bit and were ripe for a price jump, said Bill Nelson, associate vice president at A.G. Edwards and Sons in St. Louis.

 

However, the market does have fundamental concerns, with European quality issues raised amid recent rains, drought issues facing Argentine crops, and worries a building El Nino pattern in the western Pacific Ocean could result in a drought for Australian wheat provided a spark to uncover speculative buying, Nelson added.

 

This was consistent, until the exhaustion of speculative buying down the stretch coupled with pre option expiration positioning emerged to trim advances.

 

Meanwhile, the DTN Meteorlogix forecast said southern Plains wheat areas have a more favorable outlook for soil moisture this weekend and into the first part of next week. Widespread thunderstorms will develop through Sunday across the region, focusing on the Texas Panhandle and north central Oklahoma northward through Kansas. These storms will develop in some of the hardest-hit dry pockets of the southwest Plains.

 

Argentina's primary wheat areas remain dry and any showers over the next seven days will be light. There is also the potential for some freezing weather to develop during the next ten days, Meteorlogix forecasts. Dryness in eastern Australia wheat areas continues and is leading to increasing concern in New South Wales and Queensland provinces. Very little rain is in store through next week over most of this region.

 

In CBOT pit trades, UBS Securities bought 2,000 December, ABN Amro, Man Financial and JP Morgan each bought 1,500 December. Calyon Financial bought 1,000 December, Fimat bought 700 December, with Rosenthal and FCStonnee each buying 500 December. Speculative fund buying is estimated between 9,000 and 10,000 contracts.

 

On the sell side, sellers were lightly spread out among various commission houses.

 

 

KANSAS CITY BOARD OF TRADE

 

KCBT wheat was buoyed by technical support and sympathetic buying with Chicago for most of the day. This was consistent until late pre-weekend positioning surfaced to erase gains down the stretch.

 

In pit trades, FCStonnee bought 1,200 December, ADM Investor Services bought 300 December, Fimat bought 800 December, and Man Financial and Prudential each bought 1,000 December. Man Financial sold 900 December, FCStonnee sold 1,000 December, Frontier Futures sold 500 September and 400 July.

 

 

MINNEAPOLIS GRAIN EXCHANGE

 

MGE wheat futures were pulled higher on strength in Chicago wheat. Traders say the market is in the role of follower, as the absence of fresh business has failed to provide fundamental directives. Inter-market spreads were a featured attraction, with farmer selling noted as well, trader added.

 

In pit trades, Prudential Financial bought 500 December, Fimat bought 400 December, and UBS Securities bought 500 December. UBS Securities sold 400 December, JP Morgan sold 200 December, and Country Hedging sold 200 December and 100 September.