October 21, 2006

 

US Wheat Review on Friday: Analysts see market top in mixed close

 

 

U.S. wheat futures ended mostly lower Friday in quiet trading that showed signs of a market top forming, analysts said.

 

Recent volatile trading at high price levels and light volume activity are indicators of a market top, analysts said.

 

Chicago Board of Trade December wheat closed down 8 cents to US$5.05 a bushel, Kansas City Board of Trade December ended up 1 cent at US$5.31, and Minneapolis Grain Exchange December wheat settled 1/2 cent lower at US$5.09 3/4.

 

Shortly before closing, CBOT December wheat dipped as low as US$5.02 1/2, below Thursday's low of US$5.09, and then trimmed losses a bit.

 

"Technically, it does look like there is some topping action going through these charts," said Mike Hogan, a market advisor with Stewart-Peterson.

 

Some analysts said an Egyptian purchase of 180,000 metric tonnes of wheat, including 120,000 tonnes from France and 60,000 tonnes of U.S. soft white wheat, helped pressure prices down.

 

Dale Gustafson, an analyst with Citigroup Global Markets, said the Egyptian buy showed U.S. wheat prices are uncompetitively high.

 

Soft white wheat is grown in the Pacific Northwest and used to make flat breads, cakes and noodles.

 

"There was sure some incredible disappointment in here about the Egyptian purchase today," Gustafson said.

 

Hogan said the Egyptian wheat buy was "not that big of a deal" but described it as being "on the disappointing end." He noted there was likely some profit taking going into the weekend.

 

In other news, India estimated its imported wheat arrivals from April through Thursday were 2.01 million tonnes from total purchase contracts for 5.5 million tonnes. Another 10 shipments carrying 552,152 tonnes are expected to arrive by Nov. 15, the government said.

 

There has been market speculation over whether India's entire wheat purchases will be physically delivered by sellers in the backdrop of tight global supplies.

 

 

Kansas City Board of Trade

 

A KCBT floor source said a lack of fresh news and buyer interest kept trading quiet and volume low. There was some light spread trading between CBOT and KCBT in the morning, the source said.

 

"It just seemed like there wasn't a lot of interest in trading wheat today," he said. "Our volume was miserable. We were very quiet."

 

He called the Egyptian purchase a "non-event."

 

 

Minneapolis Grain Exchange

 

A MGE floor source said the Egyptian purchase was "mildly negative."

 

"I can't see any support from it," he said. "White wheat's not something you hedge in any pit. They're buying the cheapest stuff around or not anything at all."

 

Trading was relatively quiet all day, the source said.

 

"We were pretty much tied to K.C. and Chicago," he said.

 

In other news, the Winnipeg Commodity Exchange said it will be ready with new dual wheat/durum futures contracts if the Canadian government revokes the Canadian Wheat Board's monopoly powers. That would set the stage for Western Canadian producers to have a so-called "choice" environment.