September 21, 2006

 

US Wheat Review on Wednesday: Prices down on late sales; fund buys fade

 

 

U.S. wheat futures fell Wednesday after moderate fund buying that lifted prices earlier in the session cracked and allowed bearish traders to take profits, sources said.

 

Basis December contracts, Chicago Board of Trade wheat settled 1 1/4 cents lower at US$4.07 3/4, Kansas City Board of Trade wheat fell 4 1/2 cents to US$4.76 1/4 and the Minneapolis Grain Exchange futures lost 3/4 cent to US$4.55 3/4 a bushel.

 

While there are plenty of potentially supportive fundamentals at work in the market, such as well-documented crop problems in Argentina and Australia, a lack of fresh news weighed on prices, a broker said.

 

The Australian Bureau of Agricultural and Resource Economics slashed the 2006-07 crop 35% to 16.4 million metric tonnes from last season because of dry conditions. This was well below the U.S. Department of Agriculture's current projection of 19.5 million tonnes and enough to rally the market. Australian wheat needs significant rain in the next week or so to avoid further losses, officials there said.

 

In Argentina, as much as one-third of the crop could be in trouble if rains don't fall soon, said Joe Victor, analyst at Allendale in McHenry, Ill. One private forecaster, however, said that more normal rains might begin to fall in the next six to 10 days, he added.

 

But traders are desperately waiting on fresh export demand to lift prices further, which hasn't yet materialized.

 

Rumors continue to circulate that Iraq may be looking to secure wheat, along with reports that private Indian companies are looking to import 1.1 million metric tonnes of wheat. If Iraq does tender in the near term, it will be key for the market to secure a portion of that business, since expectations are so high, said Victor.

 

Cumulative U.S. export sales for 2006-07 lag last year's pace and so far total 339 million bushels, versus 436 million at the same time last year.

 

Technical resistance on CBOT December wheat is hit at Wednesday's high of US$4.13 1/2, which coincides with the 100-day moving average, then US$4.15 1/2. Support is pegged at US$4.04, then the chart gap that runs from US$4.01-US$3.98 1/2. Further support is uncovered at US$3.87 1/2.

 

Commodity funds purchased a net 1,500 CBOT wheat contracts as of 1:30 p.m. EDT, but that didn't account for the late selling.

 

Rand Financial was a featured seller of 1,300 December wheat, Man Financial bought a net 400 December, Iowa Grain bought 500 December, and ABN Amro and Rosenthal-Collins each bought 300 December.

 

 

KANSAS CITY BOARD OF TRADE

 

KCBT December wheat futures led the losses among the three exchanges, pressured by the late selling in Chicago and traders widening the December/July spread.

 

Sellers were present but there were few buyers as prices fell, a broker said.

 

In early trade, Man Financial bought a net 200 December and 100 July, ADM bought a net 300 December and Fimat bought 300 December and 100 each of March and July. UBS sold 400 December and 200 March and Country Hedging sold 200 July.

 

ADM was an active buyer and seller of the December/July spread.

 

 

MINNEAPOLIS GRAIN EXCHANGE

 

MGE December wheat futures fell slightly in light volume trade. December did reach its highest level in 1 1/2 weeks when it touched US$4.61 a bushel, before backing off a bit by the closing bell.

 

The contract found technical support at the day's low of US$4.52, which coincides with the 10-day moving average. Near-term resistance is met at US$4.61, with moving-average resistance seen near US$4.66 and US$4.75. Support is uncovered at US$4.52, then the gap that runs from US$4.47-US$4.46.