October 18, 2007

 

US Wheat Review on Wednesday: Slumps on liquidation, bearish technicals

 

 

U.S. wheat futures closed lower Wednesday for the fourth consecutive day session amid continued long liquidation and bearish technical momentum, analysts said.

 

Chicago Board of Trade December wheat settled 8 cents lower at US$8.20 1/2, the contract's lowest close since Sept. 4. Kansas City Board of Trade December wheat fell 5 1/4 cents to US$8.32 3/4, the contract's lowest close since Sept. 19. Minneapolis Grain Exchange December wheat slipped 6 1/4 cents to US$8.30 3/4, the contract's lowest close since Sept. 21.

 

Trading was choppy as the markets tried to bounce on technical buying after the recent weakness. There also was some chatter about the possibility that Egypt or Morocco would issue tenders following the setbacks, although no tenders were confirmed until after the close, traders said.

 

Egypt's General Authority for Supply Commodities said after the close it was tendering to buy 55,000 to 60,000 tonnes, but it is expected to buy more. There are ideas the business will go to the Black Sea region, a CBOT floor trader said.

 

Rumors about potential tenders sparked a sharp rally in basis at some ports in the export-dominated U.S. Gulf market. The trade talk pushed up spot soft red winter wheat premiums by as much as 20 cents a bushel.

 

Aside from the talk about tenders, there was little other fresh news out to give prices a boost, said Larry Glenn, owner of Glenn Commodities. That was seen as bearish for the markets as bulls need to be fed fresh supportive inputs every day, traders said.

 

CBOT December wheat has now lost US$1.41 1/4 since hitting its all-time high of US$9.61 3/4 on Sept. 28.

 

"The trend is definitely down," Glenn said.

 

One piece of mildly supportive news was a cut in France's output estimate, analysts said. France cut its 2007-08 wheat production estimate by around 700,000 tonnes to 33.66 million tonnes, compared with last year's 35.4 million tonnes.

 

Although the French decline reflects tight world supplies, the trade is waiting for fresh demand news, a CBOT floor trader said. There are feelings that the world supply situation is relatively well known after the U.S. Department of Agriculture's Oct. 12 supply and demand report, he said.

 

Looking at the weather, the DTN Meteorlogix forecast calls for wet or very wet weather for the western Midwest and showers also working eastward into the eastern Midwest. There will be some benefit for soil moisture in soft red winter wheat areas, but planting delays will develop as well in the eastern and southeastern Midwest.

 

SRW wheat, used to make pastries and snack foods, is traded at the CBOT.

 

 

Kansas City Board of Trade

 

KCBT wheat futures remain in a consolidation phase after rallying to record highs in late summer, a floor trader said.

 

Recent rains in the U.S. southern Plains are seen as favorable for planting and development of hard red winter wheat, traded at the KCBT, Glenn said. The precipitation is bearish for KCBT wheat futures, he said.

 

"You're getting some moisture across the Plains states," Glenn said. "That's in the background" of the markets.

 

 

Minneapolis Grain Exchange

 

Trading was thin at the MGE, and the market mainly followed the CBOT, a MGE floor trader said. The light volume encouraged choppy activity, he said.

 

The USDA on Thursday will release weekly export sales data for the week ended Oct. 11 at 8:30 a.m. EDT. Analysts expect sales to be 800,000 tonnes to 1.65 million tonnes.

 

In Australia's wheat areas, the southeast sector may see a little light rainfall later in the seven-day period, Meteorlogix said. Otherwise, dry weather will continue.