November 11, 2006

 

US Wheat Review on Friday: Fund selling, weak corn push prices down

 

 

U.S. wheat futures tumbled lower Friday as funds liquidated nearby contracts and on pressure from weaker neighboring corn prices, sources said.

 

Concerns about slow export sales, which are significantly down over last year, also pushed prices down.

 

December Chicago Board of Trade wheat settled 7 1/2 cents weaker at US$4.80 1/2 per bushel, December Kansas City Board of Trade wheat closed down 6 cents at US$5.08 3/4, and December Minneapolis Grain Exchange wheat ended 3 3/4 cents lower at US$4.97 1/4.

 

Some fund liquidation was seen in follow-through activity from Thursday, when prices closed sharply lower, sources said. Fund selling "terminated the bulls' party pretty abruptly," said Vic Lespinasse, a CBOT floor analyst for AG Edwards & Sons.

 

Fund buying had driven wheat prices up, so it made sense that fund selling pressured prices lower, said Phil Storer, director of commodity trading at Dillon Gage. Wheat prices are correcting but will likely climb higher again on ongoing concerns about tightened global supplies, he said.

 

"It has to stop and take a breath," Storer said about the wheat market.

 

CBOT corn futures are seen as the leader of the grains and ended lower on technical selling in the absence of fresh news, sources said. Wheat followed corn to the downside, Lespinasse said.

 

"All eyes have been on corn for guidance and inspiration and it's given it to them for the downside," Lespinasse said.

 

Analysts said wheat needs to see a corn rally or fresh export business to boost prices.

 

U.S. weekly wheat export sales totaled 572,900 metric tonnes for the week ended Nov. 2, 39% below a week earlier and 9% under the prior four-week average. Annual sales are down on the year.

 

Storer said he was confident export business would come to the U.S. in the long run but said traders may be selling in the short term on the absence of bullish news.

 

"They've got to have the next little news bite to help them decide what to do," Storer said about traders.

 

The U.S. Department of Agriculture on Thursday released new crop production and supply/demand estimates that kept U.S. wheat ending stocks unchanged from October estimates. The USDA forecast for U.S. wheat exports in the 2006-07 marketing year also remained unchanged in the November report at 2.07 billion bushels.

 

The report was seen as neutral for wheat by many analysts. Its release was highly anticipated by traders, who are now taking a step back to "digest" the contents, one CBOT floor source said.

 

Analysts had expected the USDA to increase the ending stocks because of weak export sales.

 

 

Kansas City Board of Trade

 

There was fund liquidation at KCBT in overall light volume activity, a floor source said.

 

"There really wasn't a whole lot going on," the source said. "Spreading was light."

 

Traders did not want to move too aggressively before the weekend, he said.

 

"Mainly it was just kind of a spillover from yesterday," he said.

 

 

Minneapolis Grain Exchange

 

There was early fund selling at MGE, where prices followed CBOT and KCBT lower, a floor source said. Fund selling triggered stops that carried prices down, he said.

 

"Spread trade was weak early and then kind of firmed up throughout the day," he said.

 

There also was some inter-market spreading against KCBT, he noted.

 

In other news, the Canadian provinces of Manitoba and Saskatchewan are jointly calling on the federal government to hold a vote on the Canadian Wheat Board's single-desk marketing authority as soon as possible. The provinces have agreed to hold their own vote if the federal government does not, the provinces' premiers said.

 

Canada has said it will hold a vote on barley marketing early next year, and the premiers said producers should vote on wheat at the same time.