November 27, 2007

 

US Wheat Review on Monday: Slides on profit-taking, overdone ideas

 

 

Profit-taking and ideas that gains last week were overdone drove U.S. wheat futures lower Monday, traders said.

 

Chicago Board of Trade March wheat fell 11 1/2 cents to US$8.34 per bushel. Kansas City Board of Trade March wheat dropped 10 cents to US$8.54 1/4, and Minneapolis Grain Exchange March wheat finished down 9 cents at US$8.81.

 

CBOT March wheat Friday closed up 67 1/2 cents on the week, and there are ideas the rally was short-term overdone, a floor trader said. The market pulled back Monday, he said.

 

Moving forward, it looks as though the market is due for more of a correction to the upside after falling sharply from an all-time high set earlier this fall, the floor trader said. However, it may be difficult for wheat to sustain a rally without strong demand news, an analyst said.

 

"Can it (rally) on air?" the analyst asked about wheat. "That's going to be tough."

 

The markets opened firmer following overnight gains, but follow-through buying did not show up, traders said.

 

Technically, it seems as though the market is struggling to stay above its 50-day moving averages, the analyst said. CBOT March wheat closed below its 50-day moving average of US$8.50.

 

In fundamental news, weekly U.S. wheat export inspections were 15.109 million bushels, the U.S. Department of Agriculture said. The inspections were below trade estimates of 20-25 million and seen as disappointing, an analyst said.

 

Indian state-run trading company PEC Ltd., meanwhile, issued a tender to import an unspecified volume of wheat. The agency is seeking about 350,000 tonnes of wheat, further draining an already tight global market in which prices have soared as a result of poor harvests in Europe and Australia.

 

The news was seen by some as bullish as the tender is for delivery in the near term and follows Friday's announcement that another Indian state trading firm, MMTC Ltd., accepted bids to import around 342,500 tonnes of wheat. However, others said the tender was expected and considered to be "old news."

 

In CBOT pit trades, MF Global bought 400 March and 200 July. Fimat and Iowa Grain each bought 200 March.

 

 

Kansas City Board of Trade

 

Profit-taking pulled KCBT wheat futures lower and weak export inspections added fuel to the bearish fire, a floor trader said. There was bearish talk on the floor about the possibility of precipitation in dry areas of the U.S. hard red winter wheat belt, he said.

 

Still, new-crop July wheat ended flat at US$7.34 1/4, while the nearby December and March contracts tumbled. There was likely some support for the deferred contract from ongoing concerns about the lack of rain in the southwestern Plains wheat areas, an analyst said. The region had less than two-10ths of an inch precipitation during the Thanksgiving weekend, DTN Meteorlogix said.

 

In the next six to 10 days, the area from the eastern Plains to the southern and eastern Midwest and north Delta is most at risk for heavier precipitation, Meteorlogix said. However, "the southwest Plains wheat areas will be left out of the moisture band," according to the firm.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures followed CBOT wheat lower, a floor trader said. Last week's rallies were probably overdone, but there are still concerns about tight supplies of spring wheat, traded at the MGE, he said.

 

This week's export sales report, due out Thursday, will be closely watched to see whether demand is picking up, the trader said. The inspections report was "not too encouraging," he said.

 

The Commodity Futures Trading Commission's weekly Commitment of Traders report is slated to be released at 4 p.m. EST. The report, regularly released on Fridays, was delayed a day due to Thanksgiving.