September 28, 2006
US Wheat Review on Wednesday: Mixed; traders await export news
U.S. wheat futures closed mixed Wednesday, with firmer prices in Chicago and steady to lower values in Kansas City and Minneapolis, as traders awaited news on exports.
Basis December contracts, soft red winter wheat at the Chicago Board of Trade gained 1 1/4 cents to US$4.24 1/4, hard red winter at the Kansas City Board of Trade lost 1/2 cent to US$4.79 and hard red spring at the Minneapolis Grain Exchange fell 2 cents to US$4.59 1/2 a bushel.
The markets gapped open higher on the technical charts on follow-through buying from Tuesday's rally, taking CBOT December to a two-month high of US$4.30 a bushel early in the session. Wheat failed to sustain the bullish momentum, however, as funds and locals began to sell. By midday, commodity funds were seen on both sides of the CBOT market.
"The market's kind of waiting for news to see if we did sell anything to the Iraqis," said Jack Scoville, analyst at Price Futures Group in Chicago.
An Iraqi wheat delegation said Tuesday that the country was interested in buying U.S. wheat but didn't give any details on when or how much, leaving traders and analysts to speculate. Rumors of Iraqi export business have been circulating the markets for about two weeks.
"We've pumped this thing up (prices) pretty good here," he added, suggesting the market believes that business is being conducted.
Expectations are so high, however, that a significant let-down would be seen if business with Iraq does not materialize, sources said. U.S. export sales are down significantly from last year and the market needs to see fresh business soon to keep the recent rally intact, a trader explained.
Estimates for weekly export sales to be released Thursday range from 350,000-500,000 tonnes. Last week, sales topped most traders' estimates and totaled 519,500 tonnes.
Spillover sales from lower corn futures also limited wheat's gains, sources said.
India's Sept. 1 wheat stocks are pegged at 6.72 million metric tonnes, down 42.2% from 11.62 million tonnes at the same time last year. Stocks have declined mostly because the government's wheat purchases from farmers declined sharply this year.
Mostly dry conditions are expected in Australian growing areas through Friday, with only scattered showers forecast in parts of southeastern New South Wales and southern Queensland, according to DTN Meteorlogix.
Dry conditions in Australia and Argentina have been underlying supportive factors for wheat, as traders expect global production to decline.
In Argentina, recent showers should help alleviate dry conditions there, and light showers are possible Thursday through Sunday though mostly dry weather is expected, Meteorlogix said.
At the CBOT, Man Financial was a featured buyer of 1,000 Dec, while R.J. O'Brien and Rosenthal-Collins each bought 500 December. Fimat was a featured seller of 1,700 December, while UBS sold 400 March and ABN Amro sold 300 December.
FCStonnee spread 1,100 December/July contracts, while O'Connor spread 1,000 March/Julys.
KANSAS CITY BOARD OF TRADE
KCBT wheat futures closed steady to slightly lower, as early buying could not be sustained and bears took control of the market.
December futures traded to an early US$4.85 high - the strongest price in four sessions - before selling pressured the market to a US$4.77 low. Moving-average support was uncovered near the low, a trader said.
In early trade, Fimat bought and sold 300 December and bought 200 July. Man Financial sold a net 200 December and 100 July, while Frontier Futures sold 200 December and ADM sold 100 December.
MINNEAPOLIS GRAIN EXCHANGE
MGE futures fell in light trade, pressured by weakness in Kansas City and Chicago coming off its early highs.
December futures hit US$4.66 early - also a four-session high and traded above its 40-day moving average - on the gap higher openings at the KCBT and CBOT.
