November 15, 2007

 

US Wheat Review on Wednesday: Bounces higher amid spillover support

 

 

U.S. wheat futures closed firmer Wednesday in a technical rebound from recent losses, with spillover support seen from stronger neighboring and outside markets, traders said.

 

Chicago Board of Trade December wheat rose 4 1/2 cents to US$7.52 1/2 per bushel. Kansas City Board of Trade December wheat ended up 10 1/4 cents at US$7.72 1/4, and Minneapolis Grain Exchange December wheat finished up 9 1/2 cents at US$8.18.

 

The markets were due for a bounce after recent setbacks, and position squaring helped boost prices, traders said. CBOT December wheat ended above a support level at US$7.50 but below its 100-day moving average of about US$7.59 1/2, they said.

 

The neighboring CBOT soybean and corn markets also ended in positive territory and provided support to wheat, an analyst said. Strength in outside markets like crude oil and precious metals was seen as another bullish factor, he said.

 

Commodity funds bought an estimated 2,000 contracts at the CBOT. In CBOT pit trades, JP Morgan sold 400 March and 200 July, while Tenco sold 200 December and 200 March.

 

Traders are still waiting for unexpected demand news, but technical activity is dominating the markets at this point, an analyst said. Jordan said it was looking to buy 100,000 metric tonnes of wheat in a tender, with half for shipment before Nov. 30 and half for shipment during the first half of December.

 

The Russian government said it plans to introduce further limitations on wheat exports in January, according to the agriculture ministry. Russia already has a 10% tax on wheat exports in place, but further restrictions are necessary because exports are continuing at a high pace and the government does not want a domestic grain deficit, the minister said.

 

A higher export tax still may not dampen Russian wheat sales, however, because exporters are racing to do business before January, an analyst said. Countries that bought U.S. wheat earlier in the marketing year could potentially cancel their purchases and switch orders to Russian wheat before the end of the year, he said.

 

Argentina has started harvesting its crop and is expected to be a strong competitor with the U.S. for exports on the world market, an analyst said. There were fears that a cold snap in Argentina could hurt the wheat crop, but early morning temperatures Wednesday suggested there was no damaging weather for the central grain belt, DTN Meteorlogix said.

 

 

Kansas City Board of Trade

 

KCBT hard red winter wheat futures felt support from worries about unfavorable dryness in the U.S. Plains, traders said. The U.S. Department of Agriculture's weekly crop progress report, released Tuesday afternoon, showed emergence was behind schedule in Plains states and that condition ratings were down from a week ago.

 

The USDA said 49% of the winter wheat crop was in good-to-excellent condition as of Nov. 11, down from 59% at the same time last year and 53% a week earlier. In Kansas, the country's top HRW wheat producing state, 49% of the crop was seen in good-to-excellent condition, down from 55% a week ago.

 

Emergence in Kansas was at 86%, down from the average of 91%. In Oklahoma emergence was 74%, down from the average of 90%.

 

Dryness should remain a problem for winter wheat in the U.S. Plains through at least the middle of next week, T-Storm Weather said in a forecast. A rapid warm-up begins in most of the region Friday, with highs returning to the 60s and 80s Fahrenheit, according to the private weather firm.

 

Warmth continues through early next week, but then cold weather should begin to sink southward, bringing some chances for rain and/or snow in the Plains during the second half of next week, T-Storm said.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures rose on technical buying and short covering, a floor trader said. Recent losses had left the market in an oversold condition, he said.

 

A rally to new contract highs in CBOT soybeans yanked wheat higher, the MGE trader said. However, the wheat market is still in a technical downtrend and will face more technical pressure in the near term, he said.