November 25, 2006

 

US Wheat Review on Friday: Fund buying pushes prices sharply higher

 

 

U.S. wheat futures climbed to a sharply higher close during an abbreviated day trading session Friday with support from fund buying, sources said.

 

December Chicago Board of Trade wheat closed 13 3/4 cents higher at US$5.00 per bushel, December Kansas City Board of Trade wheat settled 8 cents firmer at US$5.21, and December Minneapolis Grain Exchange wheat closed 9 cents up at US$5.09 1/2.

 

March CBOT wheat ended 12 3/4 cents higher at US$5.19, March KCBT wheat closed 9 1/4 cents up at US$5.37 3/4, and March MGE wheat closed 8 cents up at US$5.23 1/2.

 

Prices held near unchanged early in the day session after mixed overnight trade and on a lack of fresh news to inspire aggressive buying or selling, sources said. Gains came as funds entered the market and bought an estimated 3,000 contracts at CBOT, sources said.

 

In CBOT pit trades, Calyon bought 800 March, and Citigroup bought 600 March. JP Morgan bought 400 March and sold 800 March.

 

"The funds came in for a little post-Thanksgiving rally," a CBOT floor source said.

 

The CBOT, KCBT and MGE were closed Thursday in observance of Thanksgiving, and trading ended at 1:00 p.m. EST Friday. Overall, volume was seen as relatively thin, traders said.

 

Phil Storer, director of commodity trading at Dillon Gage, said wheat prices saw a technical bounce based on recent chart movements.

 

"I don't think there's any news that's moving it right now," Storer said about the wheat market. As for the funds, Storer noted that "on a day like this, they can move the market."

 

U.S. weekly wheat export sales totaled 361,400 metric tonnes for the week ended Nov. 16, 12% above the previous week but 37% under the prior 4-week average, the U.S. Department of Agriculture reported. The sales were within analysts' expectations of 300,000 to 500,000 tonnes and not seen as having a major impact on prices, CBOT floor sources said.

 

Major buyers included Japan at 67,000 tonnes, Egypt at 60,700 tonnes and South Korea at 43,400 tonnes.

 

"We already knew about all the major sales," a CBOT floor source said. "We need more new export business."

 

Storer said the weekly sales were "fairly good."

 

The International Grains Council, meanwhile, forecast that most northern hemisphere wheat producing nations will see planting area increase by 4% to 154 million hectares in 2007-08. Total world wheat area in 2007 is also expected to be up 4% at 215 million hectares, unchanged from the IGC's October estimate.

 

The IGC said the increase in 2007 was due to generally favorable sowing conditions, with plantings now nearing completion in the northern hemisphere. Sowings are expected to increase in France, Germany, Hungary, and Poland as well as in Ukraine, Russia, India and the U.S, the agency said.

 

It warned, however, that dry soil conditions in the U.S. hard red winter wheat belt were "starting to cause concern."

 

Conditions in the U.S. Southern Plains are dry and warm, reaching into the 80s in Texas, the DTN Meteorlogix weather agency said. Temperatures should drop by Wednesday, but precipitation will remain below normal through next week, the firm said.

 

Storer said the the dry weather conditions add "fundamental potential" for future gains.

 

"I'm not sure that news has actually hit the market," he said about the dryness.

 

  

Kansas City Board of Trade

 

KCBT December options expired Friday, although traders did not see "anything huge from that," a floor source said. CBOT wheat futures led the way to the upside and KCBT followed, he said.

 

Buyers seem to be entering the market because they were concerned about dry conditions in hard red winter wheat areas, he noted.

 

"I don't see any other reason why we're running up on a quiet day," he said.

  

 

Minneapolis Grain Exchange

 

There was a good amount of inter-market buying against CBOT in March and December contracts at MGE, a floor source said. There also was some flat price selling, he added.

 

"Inter-market bidding was the best thing out here to keep us trailing behind Chicago," the source said.

 

Weekly export sales were "nothing special" because news of the business had been previously announced, he said. Trading was choppy and of moderate volume, he said.