September 7, 2006

 

US Wheat Review on Wednesday: Lower on overdone ideas

 

 

U.S. wheat futures ended lower Wednesday, setting back from prior gains on technical selling attributed to ideas recent gains were overdone.

 

Chicago Board of Trade December wheat ended 5 cents lower at US$4.17, December KCBT wheat settled 6 cents lower at US$4.77 1/2, and December MGE wheat finished 6 3/4 cents lower at US$4.63.

 

After the recent runup in prices, the market was overdue for a technical setback, and when 6-10-day weather forecasts projecting above-normal precipitation in the hard red winter wheat belt were considered, downside movement emerged as the path of least resistance, said Brian Hoops of Midwest Market Solutions.

 

Kansas City wheat was the downside leader on technical sales, with active contracts stumbling to one-week lows as prices penetrated near-term technical support levels, traders said.

 

Chicago wheat had been buoyed by short covering interest, but without a continuation of that strength coupled with near-term weakness in corn and soybeans and the absence of a rally in European prices, it's tough for wheat to sustain price strength without a consistent dose of fresh export demand, Hoops added.

 

Lingering concerns over crop stress to world wheat supplies remained a supportive influence to limit downside pressure, traders added.

 

Meanwhile, Australia's new-crop wheat production could plunge to as low as 13 million metric tonnes if growing conditions continue to deteriorate, but won't likely reach the 10-million-tonne level seen in 2002, commodities manager and trader Emerald Group Australia Pty. Ltd. said Wednesday.

 

The DTN Meteorlogix forecast said southern and southwestern Plains winter wheat areas have had some beneficial rainfall for soil moisture during the last several weeks. Additional showers will develop in western Kansas, southwestern Nebraska, the northern Texas Panhandle, and southeastern Colorado Friday into early Saturday. The showers will bring rainfall of up to three-quarters of an inch, and will give an extra dose of soil moisture for the start of the 2006-07 winter wheat crop, which is now being seeded in some parts of the region, Meteorlogix said in the forecast.

 

The main wheat areas of Argentina and Australia, already hit with significant dry weather during this growing season, will remain mostly dry through the balance of this week. Argentina has only a few sprinkles in store during the end of this week and the weekend.

 

In Australia, a few additional very light showers will develop in the eastern belt Wednesday and Thursday, and some light showers will occur in western wheat areas this coming weekend. The rainfall will be very light, and not a major moisture provider for the winter wheat areas, Meteorlogix reports.

 

In CBOT pit trades, Fortis bought 1,200 December, Rosenthal bought 700 December, Calyon Financial bought 500 December, and Man Financial bought 400 December. On the sell side, Man Financial sold 2,000 December, ABN Amro sold 1,000 December and Fimat sold 400 December.

 

 

KANSAS CITY BOARD OF TRADE

 

KCBT wheat was little overdone which led to some profit taking, traders said. Technical selling is pressured futures in active trade, with ADM Investor Services, Country Hedging and Prudential Financial featured sellers.

 

 

MINNEAPOLIS GRAIN EXCHANGE

 

Spring wheat futures at the MGE were lower as the market followed hard red winter wheat futures lower in quiet activity, MGE floor sources said.