November 3, 2006

 

US Wheat Review on Thursday: Closes higher on corn but off early gains

 

 

U.S. wheat futures closed higher Thursday on carryover strength from corn, but fundamentals were unable to sustain sharp, early advances, sources said.

 

Traders trimmed gains on ideas prices had topped out as export sales and global supply concerns were already factored in, analysts said.

 

December Chicago Board of Trade wheat settled up 4 1/2 cents at US$4.92 per bushel, December Kansas City Board of Trade ended 4 cents higher at US$5.23, and December Minneapolis Grain Exchange wheat closed 4 1/2 cents higher at US$5.04.

 

CBOT December corn touched its daily price limit and closed higher amid speculative buying and concerns about the size of this year's crop.

 

"The wheat market didn't sustain the strength very well," said Doug Houghtonne, an analyst with Brock Associates. "The market itself still looks toppy. It looks like it can't stand on its own fundamentals."

 

Indeed, CBOT December wheat climbed more than 22 cents higher shortly after the open, reaching a high of US$5.10.

 

Part of the early boost was from the U.S. Department of Agriculture's weekly wheat export sales, which totaled 938,700 metric tonnes for the week ended Oct. 26. The sales were the highest of the marketing year so far, double the previous week, and 91% above the prior four-week average.

 

Analysts had estimated export sales would total between 400,000 tonnes and 900,000 tonnes.

 

The biggest buyers were Iraq, which took 400,000 tonnes in a previously announced purchase, the Philippines, which took 121,800 tonnes, and Mexico, which took 86,100 tonnes.

 

Houghtonne said the news "wasn't as positive as it would look at first glance" because the Iraqi purchase and an Egyptian purchase had been announced previously.

 

"Right now, really a lot of the bullish news has been factored into the wheat market," he said.

 

Houghtonne noted, however, that some unexpected exports may still pop up, including a possible sale to Pakistan.

 

Iraq, for one, isn't intending to issue a new tender to buy wheat this year, a senior official with the Grain Board of Iraq said Thursday. Instead, the board intends to ask local traders to supply imported wheat, which means they would import the wheat and the board would buy it from them, the official said.

 

Looking at price charts, a technical analyst said CBOT December wheat broke the upside price objective when it passed psychological resistance at US$5.00 during Thursday's day session. Longer-term resistance above that level lies at the 1980 high of US$5.44 1/2, he said.

 

 

Kansas City Board of Trade

 

A KCBT floor source said wheat prices followed CBOT corn higher.

 

"This is all about money blowing into commodities," she said. "The end result, the final word is funds and money buying corn."

 

Corn hit the KCBT daily limit-up in trading. The source said wheat trimmed gains near the close on profit-taking.

 

"The volume is not all that great," she said.

 

The source said she thought the export sales figures had already been factored into prices.

 

 

Minneapolis Grain Exchange

 

A MGE floor source said there were several inter-market buyers against Kansas City and Chicago.

 

"It seemed that we followed corn and we followed Chicago," the source said.

 

Strong export sales figures were somewhat expected because the Iraqi purchase had already been reported, he said. Volume was moderate, he said.

 

"It wasn't boring but it wasn't exciting," he said.