October 17, 2007

 

US Wheat Review on Tuesday: Ends down on long liquidation trend

 

 

Long liquidation and a lack of fresh bullish news drove U.S. wheat futures lower Tuesday, with Chicago Board of Trade December wheat closing at its lowest price in more than a month, analysts said.

 

CBOT December wheat finished 5 cents lower at US$8.28 1/2 per bushel, the contract's lowest close since Sept. 6. Kansas City Board of Trade December wheat ended down 5 cents at US$8.38, the contract's lowest close since Sept. 20. Minneapolis Grain Exchange December wheat settled 13 cents lower at US$8.37, the contract's lowest close since Sept. 25.

 

The markets are in a long liquidation trend amid ideas that prices have peaked after factoring in all the available bullish supply and demand news, analysts said. CBOT December wheat touched limit down Friday and Monday, and there was carryover bearish technical momentum Tuesday, they said.

 

"The long liquidation is mostly technically inspired," said Mike Zuzolo, analyst with Risk Management Commodities.

 

There has been a dearth of news this week, which opened the door for profit-taking, traders said. The trade is looking for reports of fresh export business, they added.

 

Commodity funds sold an estimated 1,500 contracts at the CBOT. Bear spreading was another feature, with traders selling old-crop December wheat and buying new-crop July wheat, traders said.

 

There also was some unwinding of long wheat/short corn spreads, a CBOT floor trader said. CBOT December corn ended down 1 1/2 cents at US$3.60 1/2.

 

CBOT December wheat is trading in a technical head-and- shoulders pattern and tested the top Tuesday with a session high of US$8.33, Zuzolo said. The contract needs to settle above US$8.35 to offset the pattern, he said.

 

Looking forward, there is a major trendline of support for CBOT December on weekly charts just below US$8, said Howard Tyllas, a registered commodity trading adviser and CBOT floor broker. The trendline may support a bounce to the upside in the near term as the contract is in an oversold condition, he said.

 

 

Kansas City Board of Trade

 

Continued long liquidation and a lack of export business weighed on KCBT wheat futures, a floor trader said.

 

The U.S. Department of Agriculture reported that 73% of the winter wheat crop was planted, below the 77% seeded in 2006 and the five-year average of 76%. Although seeding is behind schedule, planting deficits have narrowed during the past week in hard red winter wheat states in the Plains. HRW wheat is traded at the KCBT.

 

The USDA reported that 43% of the winter wheat crop has emerged, below the 48% in 2006 and the average of 51%. In Kansas, 71% of the wheat has been planted as of Sunday, compared to the average of 80%.

 

The USDA reported that 43% of the winter wheat crop has emerged, below the 48% in 2006 and the average of 51%. In Kansas, 38% of the crop has emerged compared to the average of 53%.

 

A weather system will travel across the southern and central Plains this week, leaving up to about three-fourths of an inch of rain Wednesday and Thursday, DTN Meteorlogix said in a forecast. On Friday and Saturday, conditions will be drier, allowing some wheat planting to take place.

 

Wheat in the Delta will also benefit from some of that rain, Meteorlogix said.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures slumped as traders liquidated long positions, a floor broker said. Demand news has been scarce lately and so the markets are pulling back amid ideas that prices are too high to be competitive on the world market, he added.

 

Weakness in E.U. wheat futures also set a bearish tonnee for the U.S. markets, the MGE broker said.

 

Liffe's Paris milling wheat hit a one-week low Tuesday in a market correction stimulated by continued profit-taking and losses in U.S. wheat, traders said. November Paris milling wheat closed down EUR7.75, or 3.2%, at EUR237.00 a metric tonne, with 1,714 lots traded.