November 21, 2006

 

US Wheat Review on Monday: Settles mixed after trailing corn

 

 

U.S. wheat futures ended mixed Monday after posting solid early gains on follow-through buying and with spillover strength from the neighboring corn market, analysts said.

 

Wheat didn't have the fundamental support to sustain its early advances as Chicago Board of Trade corn started to trim gains, sources said.

 

December CBOT wheat ended 1 cent higher at US$4.75 per bushel, December Kansas City Board of Trade wheat closed 1/4 cent lower at US$5.15, and Minneapolis Grain Exchange December wheat settled flat at US$4.96.

 

"Wheat can't stand on its own two feet," said Louise Gartner, an analyst with Spectrum Commodities. "If corn's not giving solid leadership, it's going to fall through."

 

Wheat climbed higher early on "general enthusiasm" from the firmer overnight trade, a CBOT floor source said. That enthusiasm faded by midday, however, and corn was left leading wheat in choppy trading, he said.

 

Corn is seen as the leader of the grains, while wheat is considered the "weak link," the source said.

 

"When corn started to show some signs of faltering, wheat was the first to get hit with some selling," Gartner said.

 

Weekly U.S. wheat export inspections for the week ended Nov. 16 were 14.464 million bushels, the U.S. Department of Agriculture reported. That was within trade estimates of 10 million to 18 million bushels and above the 12.383 million inspected a week earlier.

 

The inspections were seen as routine, sources said.

 

In the current market year to date, however, the USDA said it had inspected 387.801 million bushels of U.S. wheat for export, down from 472.647 million bushels at the same point last market year. There are still ideas that wheat prices need to come down to attract more business, sources said.

 

"You just don't have enough business," Gartner said. "If we don't get something going here, there's a worry that the USDA will start lowering export projections."

 

There was hope last week that price declines would entice Egypt to buy U.S. wheat. That didn't happen, and Egypt on Monday said it had signed a barter deal to import 120,000 metric tonnes of Kazakhstan wheat worth US$29 million.

 

Egypt's main wheat buyer, the General Authority for Supply Commodities, or GASC, usually announces tenders to buy wheat on a free on board basis.

 

An official said Monday that a committee with representatives from the government and the private sector was considering changing the system to buy wheat on a delivered basis.

 

In other news, congestion at Indian ports that is delaying delivery of wheat shipments is unlikely to ease soon, sources said. A continuing flow of shipments to Indian ports, mainly Kandla and Mundra on the west coast, has created a back-up of an estimated 400,000 metric tonnes of wheat, sources said.

 

The government is trying to end the backlog by taking possession of arrivals, through quicker unloading, transportation in bulk, and even transportation by road, an official said. In the meantime, the grains are now being covered to protect them from damage, sources said.

 

In CBOT pit trades, Man Financial bought 600 March, UBS bought 400 March, and Tenco bought 300 July. Citigroup sold 500 March, and Man Financial sold 400 March. Fimat spread 800 March/Dec. Funds bought 1,000.

 

Funds decreased their long CBOT wheat positions by 2,830 contracts and their short positions by 955 contracts as of Nov. 14, the Commodity Futures Trading Commission reported Friday. Funds were net long 35,874 contracts at CBOT, the CFTC said.

 

Commercials, meanwhile, were net short 10,100 contracts at CBOT. They cut longs by 8,595 contracts and shorts by 10,901 contracts.

 

 

Kansas City Board of Trade

 

Speculative technical buying off gains in CBOT corn pushed wheat prices higher, a KCBT floor source said. When support from corn faded, wheat had little direction, he said.

 

"I think right now we're just kind of chopping around," he said.

 

At KCBT, funds were net long 31,116 contracts as of Nov. 14, the CFTC said. They reduced long positions by 5,426 and lifted short positions by 122 contracts.

 

Commercials cut longs by 3,125, cut shorts by 5,663 and were net short 24,033 contracts, the CFTC said.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures were trailing CBOT corn during the day session, a floor source said.

 

"Nobody was really on a mission today," he said. "We were just following corn around."

 

At MGE, funds were net long 11,314 contracts, the CFTC said. They raised long positions by 775 and decreased short positions by 121 contracts.

 

Commercials were net short 9,923 contracts, the CFTC said. They decreased longs by 1,062 and increased shorts by 452 contacts.