September 7, 2007

 

US Wheat Review on Thursday: Mostly lower in correction to sharp gains

 

 

U.S. wheat futures slipped mostly lower Thursday in a correction to recent rallies and amid some profit-taking, analysts said.

 

Kansas City Board of Trade December wheat hit US$8 per bushel and set another fresh all-time high on strong demand before closing in negative territory, traders added.

 

Chicago Board of Trade December wheat closed down 11 1/2 cents at US$8.24. KCBT December wheat finished down 2 1/2 cents at US$7.88 3/4, and Minneapolis Grain Exchange December wheat fell 11 3/4 cents to US$7.59 3/4.

 

The wheat markets were overdue for a correction after prices climbed to unprecedented levels in a string of recent sessions, analysts said. The markets are technically overbought, an analyst noted.

 

Commodity funds sold an estimated 2,000 contracts at the CBOT. In pit trades, ADM bought 500 December.

 

"I'm looking for a little bit more of a correction in this wheat market," said Larry Glenn, owner of Glenn Commodities.

 

There was also borrowed pressure on U.S wheat futures from a technical correction in European markets, analysts said. Benchmark Paris-based November milling wheat dropped as low as EUR267/tonne in early moves.

 

U.S. and French wheat futures have been feeding off each other lately, and the U.S. markets stumbled without the spillover support, an analyst said.

 

Forecasts for rain in the Southern Hemisphere were seen as another bearish influence, a CBOT floor broker said. A variable temperature pattern in Argentina next week should bring in the possibility for wetter conditions, which would be beneficial to the wheat crop, according to DTN Meteorlogix.

 

Light totals are expected to fall in southern La Pampa through southern Buenos Aires next week, T-Storm Weather said in a forecast. A jet stream also may stall across the country's wheat regions next week, bringing even more moisture to growing areas, the weather firm said.

 

"The main question revolves around timing, as there are mixed indications as to when rain will begin and end," T-Storm said. "Regardless of exact timing, our estimate is that rain should occur during the first half of next week with some benefit expected."

 

 

Kansas City Board of Trade

 

KCBT December wheat hit a new high of US$8, exceeding the previous high of US$7.93 1/2 set Wednesday. Bullishness about export business amid high prices pushed the market higher before a retreat, a KCBT floor trader said.

 

The U.S. Department of Agriculture said private exporters reported sales of 125,000 metric tonnes of hard red winter wheat, traded at the KCBT, for delivery to Morocco during the 2007-2008 marketing year. The 2007-2008 marketing year for wheat began June 1.

 

There also was supportive market chatter about export sales to Algeria, Glenn said. It seems as though HRW wheat sales have been picking up lately, with Egypt also buying some this week, he said.

 

KCBT wheat futures pulled back after the demand news ran its course and CBOT wheat futures slumped, Glenn said.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures traded mixed during the day session, with nearby contracts feeling a boost from continued concerns about strong exports and shrinking world supplies, a floor trader said. Weekly U.S. wheat export sales data, due Friday and next week, will be especially revealing about whether sky-high futures prices are causing a rationing of demand, analysts and traders said.

 

The two reports should paint a clear picture about whether importers are beginning to balk at expensive prices because the reports will cover the period after prices began trading all-time highs, analysts said.

 

The USDA is slated to release export sales for the week ended Aug. 31 on Friday, one day later than usual because of the Labor Day holiday. Analysts surveyed by Dow Jones Newswires estimate export sales at 700,000 to 1.2 million tonnes.