December 1, 2006

 

US Wheat Review on Thursday: Ends firmer on positive momentum, exports

 

 

U.S. wheat futures closed solidly firmer Thursday as a turnaround from recent losses continued and news of strong export sales drove prices higher, analysts said.

 

Chicago Board of Trade March wheat closed 10 cents higher at US$5.21 1/2 per bushel, Kansas City Board of Trade March wheat ended 8 3/4 cents up at US$5.50 1/4, and Minneapolis Grain Exchange March wheat settled 9 cents firmer at US$5.30.

 

The drive to the upside started gathering steam late in Wednesday's day session after prices rallied on ideas that the market was due for a bounce after recent losses, sources said. Follow-through fund and speculative buying continued into the overnight and Thursday's day session, sources said.

 

In CBOT pit trades, ABN Amro bought 700 March, while Rand Financial sold 700 March. JP Morgan sold 600 March and Iowa Grains sold 400 March. Funds bought 2,500.

 

"It looks like the downward channel we've been in is starting to get pushed out of," said Mike Hogan, market analyst with Stewart-Peterson.

 

Support also was seen from weekly U.S. wheat export sales, a CBOT floor trader said.

 

The U.S. Department of Agriculture reported sales for the week ended Nov. 23 were 547,800 metric tonnes, 52% above the previous week but equal to the prior 4-week average. Major buyers were Japan at 91,600 tonnes, Italy at 62,500 tonnes and Egypt at 59,000 tonnes.

 

Traders and analysts surveyed by Dow Jones Newswires had estimated sales would range between 250,000 tonnes and 550,000 tonnes.

 

"We've had such slow news lately that anything can drive prices up a dime at this point," a trader said.

 

Thursday was first notice day for December wheat futures, and deliveries posted against the December CBOT wheat contract were 1,872 contracts, below industry expectations of 2,500 to 5,000 contracts.

 

Large issuers included Tenco Inc., which issued 1,382 contracts, and ADM Investor Services, which issued 274 contracts. Large stoppers included Man Financial, which stopped 652 contracts, and Banc of America Securities, which stopped 524 contracts.

 

Several CBOT floor traders shrugged off the news and said re-delivery is possible.

 

"I guess I'm a little bit surprised, but not such that it changes my world view," one source said when asked about the deliveries.

 

The lower-than-expected deliveries seemed mildly supportive, Hogan added.

 

 

Kansas City Board of Trade

 

An end-of-the-month rally drove KCBT wheat futures higher with support from the strong export sales, a floor source said. Volume was moderate, he said.

 

"Export sales were a really pleasant surprise," he said.

 

A dry weather forecast for the Great Plains was seen as supportive, he added. Hard red winter wheat areas in the Plains will miss heavy precipitation falling in the eastern Corn Belt because the humidity needed to produce rain or is "mostly east of concentrated wheat areas," T-storm Weather said.

 

The KCBT floor source noted a break in the U.S. dollar also was seen to boost wheat futures prices.

 

 

Minneapolis Grain Exchange

 

Inter-market spread trading dominated MGE action during the day session, a floor source said. Nearly 2,000 inter-market contracts were bought against CBOT, he noted.

 

"That's pretty much been our driver here all along," he said about inter-market trading.

 

A month-end rally also boosted prices, the source noted.

 

In other news, Canada is likely to garner a greater share of the grain and oilseed export market as the focus on expanding the U.S. biofuels production continues, an official with Agricore United said Thursday.

 

As the U.S. commits itself to ethanol production and as that momentum is sustained, it will mean acreage currently in other crops such as wheat, will be increasingly diverted into corn, he noted.