October 19, 2006

 

US Wheat Review on Wednesday: Follow-through selling pressures prices

 

 

U.S. wheat futures Wednesday closed lower, pressured down by follow-through selling from Tuesday's low close and in a correction to high prices, sources said.

 

December Chicago Board of Trade wheat closed 18 1/2 cents down at US$5.12 1/2 a bushel, December Kansas City Board of Trade wheat settled 6 cents down at US$5.24 1/2, and December Minneapolis Grain Exchange wheat ended 14 3/4 cents at US$5.05.

 

"This correction is long overdue," said Shawn McCambridge of Prudential Financial.

 

Profit-taking that started Tuesday, when CBOT December wheat prices hit a new contract high before closing lower, continued Wednesday, McCambridge said. Tuesday's fresh contract high was US$5.57, exceeding the previous contract high of US$5.50

 

Sources noted there was no fresh fundamental news Wednesday to support prices. Bullish concerns about production in Australia, where there has been a severe drought and about a new export quota system have already been factored into nearby futures prices, sources said.

 

Ukraine on Wednesday said it plans to impose a quota of 1.8 million metric tonnes on the export of grain in January-July 2007. On Oct. 17 the government imposed an export quota of 1.6 million tonnes for the remaining months of this year.

 

Ukraine's grain harvest this year will be 34.7 million tonnes, 2.5 million tonnes smaller than in 2005, according to the government. Export of grain harvested this year has already reached 5.5 million tonnes, 600,000 tonnes more than a year ago.

 

Morocco, meanwhile, issued a tender for 230,000 metric tonnes of U.S. wheat, although sources said that was expected. The tender included 120,000 tonnes of soft red wheat and 110,000 tonnes of hard wheat.

 

"It would be more of a factor if we never got that in," McCambridge said about the Moroccan tender. "The market is looking for something to indicate that we're going to exceed our current expectations."

 

 

Kansas City Board of Trade

 

A KCBT floor source said Wednesday's pullback was an expected correction to high prices.

 

"I just don't see anybody being an aggressive seller," he said.

 

The source said trading was busiest during the first half hour of the day session and then remained quiet throughout the rest of the day.

 

"It was very quiet after about 11 a.m.," he said. "It totally ground to a halt."

 

He said JP Morgan bought 1,500 March and ADM bought 1,000 March.

 

 

Minneapolis Grain Exchange

 

A MGE floor source said trading followed the decline at CBOT.

 

"We had a whole lot of liquidation and just not a lot of buying coming up," the source said. "It was a pretty quiet session given the price move that we had."

 

In other news, the Canadian Wheat Board may benefit from the drought in Australia. An analyst said the Australian wheat production deficit in Australia will create some opportunities for the Canadian board to move high grade wheat.