November 22, 2007

 

US Wheat Review on Wednesday: Soars limit up on technical-based speculative buys

 

 

U.S. wheat futures soared Wednesday, catapulting all three markets to limit-up levels, as the market extended its correction from prior losses on technically based speculative buying. Underlying fundamental strength was also cited by traders.

 

March CBOT wheat ended 30 cents higher at US$8.26 a bushel, March KCBT wheat settled 29 1/4 cents higher at US$8.45 1/4, and March MGE wheat finished 30 cents higher at US$8.74 1/4.

 

The market has experienced a significant correction since finding technical support at last week's lows, with dryness issues in the southern Plains and optimistic demand hopes providing underlying fundamental strength, said Bill Nelson, associate vice president A.G. Edwards and Sons in St. Louis.

 

The plains have gradually gotten drier, and that is adding a fundamental edge to the market that has found its technical footing, he added.

 

The markets roared to limit-up levels, with the exhaustion of selling interest helping uncover fresh buying to correct oversold conditions, analysts said. The market has been overdue for a bounce after a US$2.00 break in prices, and with ideas demand is starting to remerge. Also, the issue of dryness stressing some crops in Kansas, Oklahoma and Texas ahead of dormancy providing the needed boost to lift prices, analysts added.

 

Meanwhile, technical buying was featured, with advances accelerating once active contracts at all three exchanges eclipsed chart resistance, activating pre-placed buy orders, traders said. CBOT wheat managed to break out of bearish channel on technical charts, attracting fresh buying to send prices soaring, a CBOT floor analyst said.

 

Floor traders said December and March CBOT wheat was synthetically trading 8 to 10 cents above limit-up levels in the options pit.

 

The DTN Meteorlogix Weather forecast said light rain and snow during this Thanksgiving holiday weekend will do little to improve the moisture outlook for dry winter wheat areas of the U.S. southern Plains. Next week's weather pattern continues to feature rather fast-moving disturbances containing limited moisture moving through the central U.S. as well. This pattern offers little if any precipitation to the west of the Mississippi River. In addition, temperatures will warm to near to above-normal levels through the central U.S. Stress on winter wheat will continue as a result of this dry and warm situation.

 

In other developments, India's federal government may buy at least 300,000 metric tonnes of wheat from its latest import tender, a government official said Wednesday.

 

Brazil imported 317,000 metric tonnes of U.S. wheat in the last three months, and uncertainty with the Argentina crop leaves open the possibility of more U.S. wheat exports to Brazil in the coming year, according to a U.S. Department of Agriculture attache report posted on the Foreign Agricultural Services Web site.

 

In CBOT pit trades, JP Morgan bought 500 March, Rosenthal sold 700 March, and Prudential Financial sold 300 December. Speculative fund buying was estimated in a range of 4,000 to 5,000 lots.

 

 

Kansas City Board Of Trade

 

KCBT wheat futures ended sharply higher, soaring in unison with Chicago wheat. Traders said light fund buying was featured, with pre-holiday position squaring a key ingredient in the session's rise as well, analysts said. Otherwise, traders said the buying was attributed to carryover momentum from Tuesday's bounce, with the rolling of December positions active also.

 

The December/March spread traded at 15 to 14 1/2 cents late, with plenty of buying reported at 15 cents, a KCBT broker said.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures surged higher Wednesday, keeping pace with the explosive gains in Chicago and Kansas City, traders said. Follow-through buying from Tuesday was noted, amid the ability of MGE futures to break out of a bearish technical channel Tuesday, an MGE trader said.

 

Intermarket spreading was featured, with active trading in the December/March spread reported. The Dec/Mar spread traded in a wide range from 10 cents to 16 cents, a trader said.