October 18, 2006

 

US Wheat Review on Tuesday: Prices close lower in market correction

 

 

U.S. wheat futures Tuesday closed lower in a market correction to high prices, with trading volume low, sources said.

 

December Chicago Board of Trade wheat closed down 11 1/2 cents to US$5.31 a bushel, December Kansas City Board of Trade wheat ended 15 1/2 cents lower at US$5.30 1/2, and December Minneapolis Grain Exchange wheat settled 8 3/4 cents down at US$5.19 3/4.

 

Wheat prices traded higher earlier in the day but fell lower later in Tuesday's day session.

 

"The action in the last several days has been classic top forming," said John Kleist of Top Third Ag Marketing. "Once you have these big huge ranges and you do it on light volume ... in the old classic top book, this has been a top forming."

 

He added, "we've got to see if we're writing a new classic."

 

Funds, which pushed CBOT December wheat prices sharply higher just before close Monday, stopped buying Tuesday, a CBOT floor source said. That left no one left to support prices, he said.

 

Analysts said it was time for a price pullback on overbought conditions.

 

"You're so very, very overbought," said Roy Huckabay of The Linn Group. "You're due a correction."

 

There also was no fresh news to support prices, sources said.

 

CBOT traders said concerns remain about low production in Australia, which has suffered from a severe drought. However, low production estimates were already factored into prices, a CBOT floor source said.

 

"There's nothing new," the source said.

 

Argentina, which also has suffered dry growing conditions, on Tuesday released updated wheat sales data. The government said its 2005-06 wheat sales totaled 8.075 million metric tonnes as of Oct. 13, down from 10.775 million tonnes at that time last year.

 

Recent rains, however, have given Argentine crops a boost, DTN Meteorlogix said. The private weather firm predicted widespread showers during the weekend period, with the heaviest rain falling over Buenos Aires, southeast Cordoba and southern Sante Fe.

 

 

Kansas City Board of Trade

 

A KCBT floor source said the market followed Chicago and ended lower on overbought conditions. He said rains in hard red winter wheat growing areas pressured prices down.

 

ADM Investor Services bought 800 Dec. Fimat bought 300 December and 100 March, and sold 600 December and 100 July, the source said.

 

 

Minneapolis Grain Exchange

 

A MGE floor source said the market pulled back because of high prices and overbought conditions. The source said prices were overdue for a pullback and had followed CBOT prices higher in recent trading sessions.