September 1, 2006

 

US Wheat Review on Thursday: Up; fundamentals,technicals attract speculative

 

 

U.S. wheat futures ended higher across the board Thursday, led by Chicago wheat, as speculative buying remained a featured attraction.

 

December Chicago Board of Trade wheat ended 6 1/2 cents higher at US$4.04, December Kansas City Board of Trade wheat settled 5 1/2 cents higher at US$4.92 1/4, and December Minneapolis Grain Exchange wheat finished 4 1/2 cents higher at US$4.73 1/4.

 

Speculative funds were busy buying back shorts in Chicago, pulling Kansas City and Minneapolis wheat along. Supportive talk of tightening world balance sheets, improved demand prospects and bullish technicals kept futures charging higher, said a CBOT commission house broker.

 

The wheat market has a bullish fundamental story to keep traders' attention and when technical features are added, a supportive combination is set, sending sellers running for cover, he added.

 

The supportive theme was consistent from the outset. News of French wheat rallying to contract highs, a larger-than-expected tender from India and rumors of index funds exiting energy markets in favor of grains provided support to keep buyers enthused, said Brian Hoops, president of Midwest Market Solutions in Yanktonne, S.D.

 

However, with speculative funds big buyers in Chicago, and with cash wheat 80 cents under in Toledo and 65 cents under in Chicago during the delivery period, this looks like more of a technical rally than fundamental, said Sid Love of Kropf and Love Consulting in Overland Park, Kan.

 

Nevertheless, there remains talk of French quality problems and speculation of smaller crops in Australia and Argentina will continue to generate a buzz to keep speculative buying fueled, added Love.

 

Meanwhile, the DTN Meteorlogix forecast said Southern Plains winter wheat areas have had some good rains since the first of the month. Additional rainfall is in store for this region during the next five days, with up to one inch of rainfall from Thursday night through early Saturday. During next week, even more showers will develop in the region, with normal to above-normal precipitation.

 

In Argentina, a few showers will produce up to one-half inch of rain Thursday night through Friday. Dry weather will return Saturday through the middle of next week, along with much cooler temperatures and a threat of freezing conditions in the Argentine wheat belt. In Australia, showers continued along the east coast Wednesday, but didn't reach the wheat belt. Major wheat areas of New South Wales and Queensland will stay dry through the first part of next week, Meteorlogix reports.

 

In CBOT pit trades, ABN Amro and UBS Securities each bought 1,500 December; Fimat bought 2,100 December; Man Financial and JP Morgan each bought 1,000 December; and O'Connor, Prudential Financial and Fortis each bought 500 December. Speculative fund buying was estimated at 6,700 contracts.

 

Fimat sold 1,200 December, O'Connor sold 1,700 December, with ABN Amro and Rand Financial each selling 1,000 December.

 

 

KANSAS CITY BOARD OF TRADE

 

KCBT wheat futures followed Chicago wheat higher, with new highs in European wheat and carryover momentum from Wednesday adding to the bullish mix, KCBT traders said.

 

JP Morgan was a buyer of December and July wheat, and ADM Investor Services bought December wheat. Man Financial was a seller of December and July wheat, with UBS Securities a seller of December wheat.

 

 

MINNEAPOLIS GRAIN EXCHANGE

 

MGE wheat was pulled higher with the rest of the U.S. wheat complex.

 

Supportive demand prospects and higher world prices helped propel futures in tune with Chicago's gains, analysts said.