October 7, 2006

 

US Wheat Review on Friday: Mixed on late profit-taking

 

 

U.S. wheat futures ended mixed Friday as profit-taking late in the session curbed prices that were otherwise supported by unwinding bearish spreads and supply concerns, analysts said.

 

December Chicago Board of Trade wheat ended flat at US$4.64 a bushel, December Kansas City Board of Trade wheat settled 2 3/4 cents lower at US$5.01 3/4 and December Minneapolis Grain Exchange wheat finished 5 3/4 cents down at US$4.79 3/4.

 

The close was off early highs. Analysts said the downward move was a correction of overbought conditions this week when CBOT December wheat futures hit contract highs.

 

"This volatility is very, very impressive right now," said Chad Henderson of Prime Agricultural Consultants.

 

Analysts noted that supply concerns continue because there has been no sign of relief to a drought in Australia.

 

Argentina, meanwhile, said it may not have enough production to cover its export commitments.

 

Argentina also said Friday that its 2005-06 wheat sales totaled 8.03 million metric tonnes as of Oct. 6, up 8 million tonnes from a week earlier. By this time last year, Argentina had sold 10.580 million tonnes of 2004-05 wheat.

 

DTN Meteorologix said any rain in Australia during the next seven days will be mainly confined to the western wheat belt.

 

The next chance for rain in the dry Argentine wheat belt appears to be later next week, according to the firm. Early indications suggest that showers will favor the north wheat areas. The very dry areas of Cordoba and northern La Pampa, along with the southern wheat areas, may see only light showers during this time.

 

Henderson said more bullish news is necessary to support the market next week. Other analysts agreed and said the weather news had already worked its way into December wheat futures.

 

"It's either got to be weather out of the Southern Hemisphere or a new export buy," Henderson said.

 

In other news, CBOT increased its minimum margins for wheat and raised the margins on old-crop and new-crop wheat effective at the close of business Friday. Analysts said the hike could temper trading.

 

The new margins are US$1,350 initial, US$1,000 maintenance and US$1,000 hedge. Former margins for wheat were US$1,080 initial, US$800 maintenance and US$800 hedge.

 

For old-crop/new-crop spreads, the new margins are US$473 initial, US$350 maintenance and US$350 hedge. The old margins were US$270 initial, US$200 maintenance and US$200 hedge.

 

"Whenever they increase margin requirements, that's a rally killer," Henderson said.

 

In CBOT pit trades, Rosenthal bought 1,000 December wheat, Calyon bought 800 December wheat, and Man Financial bought and sold 300 December wheat. Funds bought 2,500. UBS spread 800 March-July.

 

 

KANSAS CITY BOARD OF TRADE

 

KCBT ended lower as analysts said activity followed downward CBOT movement before the close. An analyst with a commercial firm in Kansas City said the market "ran out of steam early.

 

"Closing prices were (affected by) a little bit of profit-taking into the weekend," he said.

 

The analysts noted forecasts also for precipitation in the Southern Plains at the start of next week. He said KCBT had not increased margins at last notice but the CBOT increase could affect other exchanges.

 

"It kind of nulls out some of the more retail trade in the market," he said.

 

 

MINNEAPOLIS GRAIN EXCHANGE

 

MGE ended lower, following the downward movement at CBOT and KCBT.