December 1, 2007

 

US Wheat Review on Friday: Closes mixed amid late profit-taking

 

 

U.S. wheat futures closed mixed Friday as late profit-taking and get-me-out orders dragged the markets down from strong gains, traders said.

 

Chicago Board of Trade March wheat closed 2 3/4 cents lower at US$8.85 1/2 per bushel, up 40 cents on the week. The contract rose as high US$9.11 1/2 during the session.

 

Kansas City Board of Trade March wheat settled 1/4 cent lower at US$9.06, up 41 3/4 cents on the week. Minneapolis Grain Exchange March wheat ended 8 cents higher at US$9.41, up 51 cents on the week.

 

Wheat futures opened lower on profit-taking and in a pullback from recent rallies, traders said. Heavier-than-expected deliveries against the CBOT December wheat future on first notice day, which was Friday, were also seen as bearish.

 

However, there were no deliveries against the KCBT and MGE December wheat futures. Concerns about the lack of deliveries and tight supplies prompted MGE wheat to soar, which sparked temporary rallies at the other exchanges, traders said.

 

With MGE as the leader, prices at all three exchanges climbed sharply higher on short-covering and speculative buying interest, traders said. MGE traders had said they were expecting deliveries of at least 400 contracts.

 

"We had heavy deliveries in Chicago, but you had none in Kansas City and Minneapolis," said Dale Durchholz, senior analyst at AgriVisor. "It makes them think that supplies are really tight."

 

There were also bullish ideas that India's consumption will increase and that the country will remain a buyer on the world market for the next six months or so, said Mike Zuzolo, analyst for Risk Management Commodities. Commodity fund interest was another supportive factor during the session, he said.

 

"The funds are looking for the value markets, the markets that have been hit, the markets that have already had a correction," Zuzolo said.

 

The markets were unable to hold the strong gains in front-month contracts as end-of-the-month profit-taking and get-me-out orders weighed on prices just before the close, traders said. Traders are taking premium out of the front-months, which is not a sign of a bull market, Durchholz said.

 

Deferred, new-crop contracts held up better, but the markets still look "tired" after pulling back from rallies Thursday and Friday, traders said. Trading was volatile throughout the session.

 

"I think the wheat market looks like it exhausted itself," Durchholz said.

 

 

Kansas City Board of Trade

 

There were concerns about the fact that there were no deliveries against the KCBT December future, but KCBT wheat futures mainly followed MGE higher in the rally, a floor trader said. KCBT December wheat closed up 11 1/2 cents at US$9.07 per bushel after hitting a session high of US$9.25.

 

Dryness in parts of the U.S. Plains remains supportive to the new-crop, KCBT traders said. This weekend will bring significant winter storm conditions to the central U.S, but there will not be much benefit to the driest areas of the hard red winter wheat belt, said DTN Meteorlogix.

 

The Meteorlogix forecast calls for the worst weather to cover the central Plains through western and northern Midwest. Heavy ice is in store for northeastern Kansas through northern Missouri into central Iowa, along with possible heavy snow from northern Iowa into Minnesota, according to the firm.

 

Lighter snow of up to four inches will be seen in northeastern Nebraska through southeastern South Dakota. Only light moisture of less than one-quarter inch will occur in the Texas Panhandle, Meteorlogix said.

 

 

Minneapolis Grain Exchange

 

MGE December wheat hit a new all-time high of US$9.74 1/2 during the session and ended up 5 1/2 cents at US$9.50. Volume in the contract was higher than in recent session due to short-covering and fears about tight supplies, traders said.

 

MGE wheat futures led CBOT and KCBT wheat higher during the rally as shorts got out of the market, a MGE floor trader said. The lack of deliveries against the MGE December contract on first notice day "got the shorts real nervous here," he said.

 

There was some bull spreading, floor traders said. Outright buying of MGE December wheat also lifted other contract months, a trader said.

 

It was "just shorts in the Dec running the whole thing up," the trader said.