December 7, 2006

 

US Wheat Review on Wednesday: Tumbles sharply lower on fund liquidation

 

 

U.S. wheat futures settled sharply lower Wednesday, with prices weighed down by heavy fund liquidation amid concerns about slow export business, sources said.

 

Chicago Board of Trade March wheat ended 21 3/4 cents weaker at US$4.95 1/2, Kansas City Board of Trade March wheat closed down 23 1/4 cents at US$5.11, and Minneapolis Grain Exchange wheat settled 16 1/4 cents lower at US$5.06 1/2.

 

Funds sold an estimated 5,000 contracts during the day session and kept prices firmly in negative territory, a CBOT floor trader noted. The funds were looking to take profits before the end of the year, he added.

 

Follow-through speculative selling from the overnight also showed up early and hit some stops, sources said. There are ongoing worries about the pace of export sales, they said.

 

"Pessimism about old-drop demand was behind the drive lower," a CBOT floor source said.

 

Bulls had expected U.S. export sales to increase this season amid tightened world supplies, traders added. Still, business remained mediocre, sources said.

 

"The bull story never developed," a CBOT floor trader said.

 

There was little fresh fundamental news out Wednesday to support prices, sources said.

 

Recent reports that Iraq had tendered to buy 100,000 metric tonnes of optional-origin wheat did nothing to support prices, floor traders noted. The tender was seen as small and some traders wondered whether Iraq would go through with the purchase, sources said.

 

News about the crop condition is scare as most are headed into dormancy, sources noted.

 

CBOT corn and soybean futures also ended lower. Wheat is seen as a follower in the grain market, while corn is the leader, an analyst noted.

 

 

Kansas City Board of Trade

 

KCBT saw heavy fund selling late that extended some stops, a floor source said. Throughout most of the day session, there was a lack of buying, he added.

 

"Nobody wanted to buy this thing," he said about wheat.

 

Volume was moderate, the source noted.

 

"There wasn't any major selling to push this thing down," he said.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures followed CBOT prices to the downside, a floor source said. There was heavy liquidation of inter-market spreads with traders selling MGE and buying either CBOT or KCBT, he noted.

 

There was a good amount of outright fund selling with some commercial buying, the source said. There were few calendar spread trades, he added.

 

Overall, volume was seen as moderate, he said.