November 18, 2006

 

US Wheat Review on Friday: Ends higher on corn rally, short covering

 

 

A late rally in corn prices carried U.S. wheat futures to a higher close Friday amid short covering after declines Thursday, sources said.

 

Chicago Board of Trade December wheat ended 5 1/4 cents higher at US$4.74 per bushel, Kansas City Board of Trade December wheat settled 3 3/4 cents higher at US$5.15 1/4, and Minneapolis Grain Exchange December wheat closed 5 1/2 cents firmer at US$4.96.

 

Wheat futures closed lower in Thursday's day session, and traders used Friday's corn rally as an excuse to correct part of the declines, said John Kleist, senior analyst with Top Third Ag.

 

"The corn rallies and, bingo, we got some short covering," Kleist said.

 

Before corn prices swung higher, wheat saw quiet, choppy trading throughout most of the day session. There was little fresh fundamental news out to drive prices, a CBOT floor source said.

 

The source added that there were few new buyers on the late corn rally.

 

"Everybody was short," the source said.

 

Traders had thought Egypt would issue a new tender after the declines in U.S. wheat prices Thursday, sources said. That did not materialize during the day session, but the possibility of an Egyptian tender prevented market participants from trading too aggressively, sources said.

 

Traders said they also were expecting larger wheat production next year after tightened global supplies boosted futures prices to 10-year highs in October, sources said.

 

Soggy conditions in the eastern Midwest, particularly in Ohio, have been a concern for the winter wheat crop, sources said. But the DTN Meteorlogix forecast calls for mostly dry weather in the eastern Midwest through next week.

 

The drier weather pattern in the area will be accompanied by normal to above-normal temperatures, the weather firm said.

 

In other news, Argentina on Friday temporarily closed its export registry for 2006-07 grains, although a government official said the move would not block exports based on previous declarations.

 

All Argentine agricultural exports must be registered for export, and a reference price is then fixed based on the day of registration. The export tax is fixed based on the reference price set on that day.

 

Declared exports of wheat and corn have reached unprecedented levels in Argentina recently as exporters have raced to lock in reference prices and export commitments amid uncertainty over the government's desires to limit exports and control domestic food prices, analysts said.

 

Kleist said the closed export registry did not appear to affect prices much during the day session. The condition of the Argentine wheat crop has improved in the last several weeks, he noted.

 

 

Kansas City Board of Trade

 

The CBOT corn rally pushed KCBT wheat prices higher just before the close, a floor source said. Earlier in the day session, KCBT wheat traded lower without fresh fundamental news and on carryover weakness from Thursday, he said.

 

"It kind of felt like we were under pressure all day long," he said. "At the end, with corn taking off, we went up."

 

Man Financial sold 1,000 March and bought 500 December and 700 March, the source said. Fimat bought 400 March, he said.

 

 

Minneapolis Grain Exchange

 

MGE saw choppy trade during the day session and hit stops as it moved to the downside early in the day session, a floor source said. The CBOT corn rally brought prices solidly higher at the end of the session, he said.

 

"Our pit watched the corn really closely," he said.

 

There was moderate trading volume and not a lot of spread trade, he said.