US Wheat Review on Wednesday: Slides on fund selling, profit-taking

 

 

Fund selling and profit-taking knocked U.S. wheat futures lower for the second consecutive day Wednesday, raising some ideas the markets may have hit a short-term top.

 

Chicago Board of Trade March wheat ended down 8 cents at US$5.76 a bushel. Kansas City Board of Trade March wheat slid 6 cents to US$5.65 1/2, and Minneapolis Grain Exchange March wheat lost 4 1/2 cents to US$5.80 1/4.

 

The slump extended losses from Tuesday, when CBOT March wheat finished lower after setting a one-week high. There is a "good possibility" that the markets have seen a short-term top, said Tom Leffler, owner of Leffler Commodities.

 

Commodity funds were net sellers for the second consecutive day, traders said. They sold an estimated 3,000 wheat contracts at CBOT on Wednesday.

 

Wheat is "technically and fundamentally overextended to the upside," Leffler said. Fundamentals have been seen as weak for months due to large world supplies and lackluster export demand.

 

After the close of trading, Egypt's state-owned wheat buyer, the General Authority for Supply Commodities, issued a snap tender to buy wheat, traders said. Egypt is known for being price sensitive, and the markets will watch for the results of its tender Thursday.

 

 

Kansas City Board of Trade

 

CBOT and KCBT wheat would be "justified" to be closer to US$5 than US$5.50, based on market factors, Leffler said. The markets are being led by technicals and the flow of fund money, he said.

 

Losses in CBOT corn and soy and strength in the U.S. dollar added to wheat's bearish tonnee, traders said. Wheat is related to neighboring corn and soy markets because funds often trade in a basket of commodities and because corn and wheat can be used for animal feed. A firm dollar is said to make U.S. grain less attractive to foreign buyers.

 

The U.S. Department of Agriculture in January is due to issue its first estimates on U.S. winter wheat plantings. Until then, news will be slow and consist only of "little things that pop into the market," Leffler said.

 

 

Minneapolis Grain Exchange

 

MGE sustained the most modest losses of the wheat markets. Funds tend to be more active at the CBOT because it has more volume and liquidity than the MGE.

 

Traders are waiting for USDA to issue weekly U.S. export sales data at 8:30 a.m. EST Thursday. Wheat export sales are expected to be 300,000 tonnes to 500,000 tonnes.

 

In other news, Statistics Canada is expected to raise its estimate for 2009-10 all-wheat production to 24.90 million to 25.50 million tonnes from its September estimate of 24.58 million. It is scheduled to release the revised crop estimates at 8:30 a.m. EST Thursday.