September 27, 2006

 

US Wheat Review on Tuesday: Rallies; CBOT leads on optimistic outlooks

 

 

U.S. wheat futures posted sizable gains Tuesday, with Chicago wheat leading the upside move in a technical correction from prior losses amid optimistic longer term fundamental outlooks.

 

December CBOT wheat ended 9 1/4 cents higher at US$4.23, December KCBT wheat settled 8 1/2 cents higher at US$4.79 1/2, and December MGE wheat finished 7 1/2 cents higher at US$4.61 1/2.

 

The market was buoyed by speculative buying as long-term friendly outlooks with prospects for a tightening world balance sheet and increased demand attracting buyers to the market, said Shawn McCambridge, senior grains analyst at Prudential Financial in Chicago.

 

The supportive price action was consistent from the outset, with futures recouping Monday's losses amid a host of supportive supply and demand forecasts. Optimism associated with potential demand from Iraq, buying interest from India, news of Russian wheat quality problems and offers drying up from the Black Sea rekindled ideas of tighter world supplies, analysts added.

 

Lingering concerns surrounding crops in Argentina and Australia were noted as underlying supportive features.

 

Technically inspired buying served as a key contributor in the day's gains, with advances accelerating once the most active CBOT December wheat future climbed through technical resistance resting at last week's high -US$4.23 per bushel. Options related buying added to the supportive tonnee filtering through the market as well, traders added.

 

CBOT wheat successfully bounced back near the high end of its trading range as world supply concerns continue to provide support to prices. However, traders remain cautious of chasing prices at higher levels based on previous pressure exerted at these values, said John Kleist of Top Third Ag Marketing in Chicago.

 

"The market previously has not been able to follow through on gains based on supply fears due to demand realities," said Kleist. Despite world supply concerns, the U.S. up to this point, has not been able to generate enough demand to sustain lofty price levels, he added.

 

Meanwhile, the DTN Meteorlogix forecast said rainfall prospects in Argentina's major wheat areas are diminishing notably during this coming weekend. Only a few light showers are in store through Saturday. Beyond Saturday, there is no significant rainfall chance during the weekend. Any showers that may occur will hold off until Tuesday of next week. Australia's primary wheat-growing areas also remain in the grip of dry weather. No significant rainfall is in sight through the end of the week.

 

In CBOT pit trades, Fimat, JP Morgan, Fortis, Rosenthal and Rand Financial were featured buyers with speculative funds estimated buyers of 3,000 contracts.

 

 

KANSAS CITY BOARD OF TRADE

 

Technical support off of yesterday's losses provided support to prices as did mild concerns over wet conditions delaying some hard red winter wheat plantings, analysts said. However, KCBT wheat couldn't challenge last week's highs, as intermarket spreads limited upside potential, said Kleist.

 

 

MINNEAPOLIS GRAIN EXCHANGE

 

MGE wheat was a follower of other wheat markets once again, with concerns over tight global supplies providing underlying support. Intermarket spreads managed to keep futures lagging behind gains in Chicago, traders said.