October 6, 2006

 

US Wheat Review on Thursday: Mixed as profit taking cuts CBOT gains

 

 

U.S. wheat futures ended mixed, with Chicago Board of Trade falling from new contract highs as a flurry of profit taking pressured the market late in the session.

 

The sell-off in CBOT was felt at the Minneapolis Grain Exchange and the Kansas City Board of Trade as those markets also came off of their highs.

 

December CBOT wheat ended 1 cent lower at US$4.64 a bushel, December KCBT wheat settled a 1/2 cent higher at US$5.04 1/2, and December MGE wheat finished flat at US$4.85 1/2.

 

Prices were firmer at the exchanges, starting higher and holding gains through midday but fell just before the closing bell. Floor traders said profit-taking pressured the market down.

 

"It portends a little more weakness to follow," one cash-connected trader said about the downturn. "The bull has to continuously be fed. If you don't have this momentum going, then you have a tendency to back off."

 

Traders said the cash market also was overpriced compared to demand.

 

Prior to closing, the CBOT December hit a new contract high of US$4.87 a bushel after reaching the previous contract high of US$4.69 1/2 on Wednesday. Analysts said fund buying and follow-through trading from Wednesday's rally, in which nearby prices hit limit up, had helped the market advance.

 

Some analysts noted they were disappointed by weekly export data released Thursday by the U.S. Department of Agriculture.

 

Sales for the week ending Sept. 28 totaled 377,800 metric tonnes, versus trade estimates of 350,000 to 500,000 tonnes. This sales figure is 8% below the previous week and the prior 4-week average. The biggest buyers were Mexico, Japan and South Korea.

 

In other news, Brazil said its 2006-07 wheat crop was put at 2.4 million metric tonnes, 50% smaller than the frost-impacted 2005-06 crop the southern states recently harvested.

 

The European Union didn't issue any import licenses Thursday in the EU's low- and medium-quality import quota tender. French cash and wheat futures set new highs on the strength in Chicago.

 

Despite the market decline, the cash-connected trader said the price drop was not a key reversal, which is a technical chart formation.

 

"Technically, you have to be trading below yesterday's low to trigger any major sell off," he said.

 

In CBOT pit trades, Fimat bought 1,400 December wheat and RJ O'Brien bought 1,000 December. Man Financial sold 1,100 December, while ABN Amro sold 500 December, and UBS sold 300 December and 1,000 March. Rand spread 2,500 Dec-July.

 

 

Kansas City Board of Trade

  

KCBT ended modestly higher after seeing firmer prices earlier in the day. An analyst said buyers in long position backed off near the end of the day.

 

A Kansas City-based analyst said the price drop illustrated "the idea that the supply side rally has gone far enough."

 

Weather was also on analysts' minds in all three markets. Some said some buyers were nervous about an ongoing drought in Australia, although the Kansas City analyst argued it was still too early to write off crops from Australia. Weather forecasters have reduced the likelihood of rain in Australia in long-range outlooks.

 

 

Minneapolis Grain Exchange

 

MGE futures closed flat, evening out the slightly lower close in Chicago and the small gain in Kansas City. Analysts said MGE was following the other U.S. wheat markets.

 

In other news, Canadian farm groups said they supported keeping the Canadian Wheat Board intact, rather than break up the monopoly. The farm groups were responding to a task force recently created by federal agriculture minister Chuck Strahl, which has been instructed by the federal government to examine not if, but how, to eliminate the single desk.