US Wheat Review on Tuesday: Extends gains as fund money flows in

 

 

U.S. wheat futures closed at six-month highs Tuesday as fund money flowed into the markets in the face of bearish fundamentals.

 

Chicago Board of Trade December wheat closed up 12 1/2 cents at US$5.74 3/4 per bushel. Kansas City Board of Trade December wheat climbed 13 3/4 cents to US$5.74, and Minneapolis Grain Exchange December wheat jumped 7 3/4 cents to US$5.82.

 

There some was technical, follow-through buying after CBOT December wheat closed above its 200-day moving average Monday, an analyst said. The contract on Tuesday ended about 15 cents above the 200-day moving average, which was around US$5.60.

 

CBOT December wheat in late trading on the screen touched a fresh session high of US$5.75 1/2, the contract's highest price since Aug. 4, and closed at its highest price since Aug. 3. It was the highest close for a nearby contract on a monthly continuation chart since May.

 

Commodity funds bought an estimated 5,000 wheat contracts at the CBOT. The funds were also buyers in the neighboring CBOT soy complex.

 

"The fundamentals don't even start to support this," Tom Leffler, owner of Leffler Commodities, said of wheat's rally. "We do not have fundamentals in the world or the U.S. to support this. The markets are getting an influx of money from the funds."

 

 

Kansas City Board of Trade

 

KCBT December wheat closed at its session high of US$5.74, the contract's highest close since Oct. 23. It was the highest close for a nearby contract on a monthly continuation chart since May.

 

Supply-and-demand factors were ignored, as world ending stocks are large and export sales have been slow, traders said. Leffler called the rally "ridiculous" because it ignored the fundamentals.

 

Wheat rose despite strength in the U.S. dollar and sentiment that Monday's rally was overdone, traders said. Weakness in the U.S. dollar was said to have supported commodities Monday.

 

 

Minneapolis Grain Exchange

 

MGE December wheat closed near its session high of US$5.82 1/2. The contract closed at the highest level for a nearby contract on a monthly continuation chart since July.

 

MGE wheat trailed gains at the CBOT because speculative funds are more active at the CBOT, a trader said. Funds prefer the CBOT because it has more volume and liquidity.