October 20, 2006

 

US Wheat Review on Thursday: Prices end modestly higher on rebound

 

 

U.S. wheat futures on Thursday settled modestly higher on a rebound from two days of low closes, sources said.

 

December Chicago Board of Trade wheat closed up 1/2 cent to US$5.13 a bushel, December Kansas City Board of Trade ended 5 1/2 cents higher at US$5.30, and December Minneapolis Grain Exchange wheat settled 5 1/4 cents higher at US$5.10 1/4.

 

"I don't think we're through with the wheat yet," said Phil Storer of Dillon Gage. "This time we had two down days and now we're going to have a little bit of an up day."

 

The low closes Tuesday and Wednesday were considered market corrections to high prices, sources said. Sources said firmer CBOT overnight trading and a carryover boost from soybeans, which have seen three-month highs, supported wheat prices early Thursday.

 

Bill Nelson, of A.G. Edwards & Sons, said there is "a lot of speculative interest, a lot of buying interest in wheat, corn and beans."

 

"We had a strong bean market," he said.

 

Although some disagree, Storer added that global supply concerns, particularly about a severe drought in Australia, continue to support wheat prices. He said the expected world shortage had not yet been completely factored into futures prices.

 

"You're not going to cure a shortage of wheat overnight or with an inch of rain in Australia," he said.

 

The U.S. Department of Agriculture said net weekly export sales for wheat were 445,300 tonnes, 36% below the previous week and 11% under the prior four-week average. Trade estimates called for commitments in the 250,000- to 600,000-tonne range. The biggest buyers were Guatemala, buying 65,800 tonnes, and the Dominican Republic with 44,500 tonnes.

 

Nelson said the number were in line with general expectations.

 

"Once again, they're historically a bit weak and again reinforce the situation that wheat export sales are substantially behind the normal shipment rate," he said.

 

In other export news, Japan bought 125,000 metric tonnes of U.S. and Australian wheat in a routine tender concluded Thursday. The U.S. supplies included 39,000 tonnes of dark northern spring wheat, 25,000 tonnes of hard red winter wheat and 6,000 tonnes of western white wheat.

 

The European Union's grain management committee, meanwhile, decided Thursday to open tenders to resell nearly 1.1 million metric tonnes of wheat from intervention stores back on the domestic market, according to government sources.

 

Nelson said he did not think the E.U. intervention sale would affect U.S. futures prices.

 

"That's more of a lagging situation, not a leading," he said.

 

 

Kansas City Board of Trade

 

Early fund buying, along with strong carryover action from CBOT overnight trading, boosted prices, a KCBT floor source said. The source said USDA weekly export sales figures were in line with estimates.

 

There was minimal fund activity, the source said. Man Financial bought 400 December and 100 March and sold 100 December.

 

 

Minneapolis Grain Exchange

 

A MGE floor source said early buying came on momentum from overnight CBOT trading and the Japanese tender. He said traders also were trying to earn back money that they lost in inter-market spreads.

 

The source said the Australian drought and production concerns were no longer supporting higher prices.

 

"We haven't had good export sales all year long on wheat," he said. "To say it's demand driven is kind of ridiculous."