September 14, 2006

 

US Wheat Review on Wednesday: Sells off late on technicals, spillover

 

 

U.S. wheat futures fell Wednesday after earlier fund-buying evaporated and bearish traders drove prices lower and through key chart points, sources said.

 

December wheat at the Chicago Board of Trade hit a 3 1/2-week low, Kansas City fell to a three-week low and Minneapolis saw its weakest price in four months on the decline.

 

Basis December contracts, CBOT fell 5 cents to US$3.97 1/2, Kansas City Board of Trade fell 4 cents to US$4.66 and the Minneapolis Grain Exchange ended 4 3/4 cents lower at US$4.44 1/2 a bushel.

 

News that Egypt purchased 120,000 metric tonnes of U.S. wheat, which supported the market's earlier gains, was simply not enough to sustain bullish traders and buying enthusiasm waned, sources said.

 

A weak technical setup from recent losses had a larger influence on prices, said Dale Durchholz, analyst at AgriVisor Services in Bloomingtonne, Ill.

 

Selling momentum picked up once CBOT December wheat fell through the 20-day moving average near US$4.02 1/2 on the technical charts, he said. The top of the day's range coincided with the key 40-day moving average.

 

Near-term technical support on December is uncovered at a gap from US$3.97-US$3.96, then at US$3.88 1/2 and the Aug. 18 US$3.76 3/4 low. Resistance is met at US$4.02, US$4.07, US$4.12 and US$4.14.

 

Wheat traders eventually shrugged off the Egypt news in favor of the weak technical downtrend the market has been stuck in over the past days, Durchholz explained.

 

The recent drop in prices has taken most-active wheat futures below nearly all of their major moving averages, which has encouraged technical as well as local selling pressure, a broker says. Recent moisture in the southern Plains has contributed underlying pressure to the market.

 

Corn and soybean futures falling off their highs added to the bearish atmosphere in the trading pit.

 

In news, French 2006-07 soft wheat production was pegged at 33.1 million metric tonnes, down 2.2 million tonnes from last month's estimate, the state grains board Office National Interprofessional des Grandes Cultures said Wednesday. Adverse weather has trimmed yields from last year's production of 34.9 million tonnes. E.U. soft wheat production is estimated at 111 million tonnes, down 3.5% from last year.

 

As of 1:30 p.m. EDT, funds were net buyers of 1,000 CBOT wheat contracts, though that total was altered by the late sell-off.

 

Shatkin-Arbor sold 500 December, J.P. Morgan sold 400 December and ABN Amro sold 200 December. Iowa Grain bought 1,000 December, Tenco bought a net 400 December, Rand Financial bought 300 December and Man Financial bought 200 December.

 

 

KANSAS CITY BOARD OF TRADE

 

KCBT December wheat futures fell to a three-week low of US$4.65 with the late sell-off. The market followed Chicago lower and bearish momentum picked up in the last 45 minutes of trading.

 

Funds were buyers earlier in the session, but turned sellers shortly after midday, a broker said.

 

In early trade, activity was light as players bought and sold mostly 100-lot sizes of December wheat. Country Hedging and Man Financial were each sellers of 100 contracts December.

 

 

MINNEAPOLIS GRAIN EXCHANGE

 

MGE December wheat traded to its weakest price in four months, hitting a US$4.43 low on the decline. The technical weakness has pulled prices well below its major moving averages, and a relative strength index of 26% suggests oversold conditions.

 

Near-term support is found at US$4.39 1/4, then at a gap area from US$4.39 1/4-US$4.37. The US$4.23 level provides additional support. Resistance is met at US$4.53, US$4.60 and US$4.62 1/2.