US Wheat Review on Wednesday: Extends gains on fund, technical buying

 

 

U.S. wheat futures ran higher Wednesday on fund and technical buying, but the markets trimmed gains ahead of the close.

 

Chicago Board of Trade December wheat closed up 8 3/4 cents at US$5.31 3/4 per bushel. Kansas City Board of Trade December wheat climbed 9 3/4 cents to US$5.35 1/4, and Minneapolis Grain Exchange December wheat jumped 6 1/4 cents to US$5.50 3/4.

 

A strong close on Tuesday set the markets up for a firm trade Wednesday, a CBOT floor trader said. CBOT December wheat hit a session high of US$5.40 before paring gains and closed above last week's high of US$5.28 1/4.

 

Fundamentals didn't support the gains, traders said. Demand for soft red winter wheat, traded at the CBOT, is lackluster, but there was fund money flowing into the markets, a CBOT trader said. Commodity funds bought an estimated 3,000 wheat contracts at the CBOT.

 

On the world scene, global ending stocks are large. Egypt's state-owned General Authority for Supply Commodities said it was tendering to buy 55,000 to 60,000 tonnes of wheat on a free on board basis.

 

Traders will look at the results of the tender Thursday, but the U.S. isn't expected to be a strong competitor for business, a trader said. Egypt is known for being a price-sensitive buyer, and rallies have priced U.S. wheat out of the export market, he said. Egypt last week bought 120,000 tonnes of French and Russian wheat in a tender and snubbed the U.S.

 

In other news, the CME Group (CME) said it wanted to implement a variable storage rate for CBOT wheat starting with the July 2010 contract month, instead of the previously proposed September 2010 contract. The change is designed to improve cash-futures convergence, which is critical for hedging.

 

 

Kansas City Board of Trade

 

Hard red winter wheat futures at the KCBT closed higher as the markets extended gains from Tuesday. Fund and technical buying were seen as supportive, a trader said.

 

Weekly U.S. export sales data will be issued Friday, one day later than normal due to the Veterans Day holiday Wednesday. Large world supplies are keeping a lid on export demand for U.S. wheat, according to a note from PFG Best.

 

"Importers can go to any port of low cash bid," the firm said. "They only buy as needed on the month and save money by not having large inventory and paying storage and insurance."

 

 

Minneapolis Grain Exchange

 

MGE wheat closed firmer but continued to trail behind the CBOT and KCBT. MGE on Tuesday closed slightly lower, while CBOT and KCBT wheat finished higher.