December 8, 2006

 

US Wheat Review on Thursday: Ends up on corn spillover; rebound seen

 

 

U.S. wheat futures settled modestly higher Thursday with spillover support from the neighboring corn market and in the absence of heavy fund liquidation, sources said.

 

Chicago Board of Trade March wheat ended 1/4 cent stronger at US$4.95 3/4 per bushel, Kansas City Board of Trade wheat closed 2 3/4 cents higher at US$5.13 3/4, and Minneapolis Grain Exchange wheat settled 2 1/2 cents higher at US$5.09.

 

Wheat is seen as a follower of CBOT corn in the grain market and felt a boost from stronger corn prices during the day session, said Chad Henderson, analyst with Prime Agricultural Consultants.

 

Wheat futures also posted gains in a rebound from end-of-the-year fund profit-taking that weighed on prices Wednesday, a CBOT floor trader noted. Wednesday's fund liquidation caused some technical damage to wheat, although there was not much follow-through technical selling Thursday, the trader said.

 

Trading was mostly quiet during the day session, CBOT floor sources added. In CBOT pit trades, Iowa Grains sold 1,000 March, while Fimat and Man Financial each sold 500 March.

 

Ongoing background pressure on wheat was felt from slow export sales, traders said. News reports that Egypt would import 750,000 tonnes of wheat from Kazakhstan were seen as bearish, they said.

 

Egypt said Thursday it bought 60,000 tonnes of U.S. soft white wheat for shipment Jan. 5-16. The purchase did not boost U.S. wheat prices, however, because the tender was seen as small and there is little trader interest in soft white wheat, a source said.

 

The U.S. Department of Agriculture released weekly U.S. wheat export sales figures that were considered "solid" but not overly bullish, a source said. For the week ended Nov. 30, sales totaled 403,900 metric tonnes, 26% below the previous week and 11% under the prior four-week average, according to the USDA.

 

Major buyers were Japan, which bought 92,700 tonnes, and Venezuela, which bought 45,600 tonnes. The U.S. sold 54,300 tonnes to unknown destinations, the USDA said.

 

The sales were squarely within analysts' estimates, which ranged from 300,000 to 500,000 tonnes, one analyst noted. Still, year-to-date export business is below USDA expectations, he said.

 

Looking at the weather, there is some chance for precipitation in dry winter wheat areas of the U.S. Southern Plains next week, DTN Meteorlogix reported. Texas and Oklahoma have the best shot at seeing moisture once a dry period ends this weekend, according to the weather firm.

 

A major storm system last week significant reduced drought in the central region of the U.S, according to a Drought Monitor report released Thursday by the U.S. Department of Agriculture, National Weather Service and the National Drought Mitigation Center.

 

The storm brought significant improvement to parts of the region as cumulative melted precipitation of 2 to 5 inches helped reduce dry and drought areas from northern Texas into western Illinois, the report stated.

 

In other news, Statistics Canada estimated all wheat production in Canada during 2006-07 at 27.277 million metric tonnes, above pre-report estimates of 26 million to 27 million tonnes. The new estimate was considered high and seen as bearish, an analyst said.

 

 

Kansas City Board of Trade

 

KCBT wheat futures climbed higher in a rebound from sharp declines seen Wednesday, a floor source said. Trading was "pretty uneventful" during the day session as aggressive buyers and sellers were scare, he noted.

 

Many traders expected heavy follow-through fund liquidation after Wednesday, but that did not happen, he added.

 

"It was fairly quiet here in Kansas City," the source said.

 

The sale to U.S wheat to Egypt was not a surprise and did not influence trading, the source said.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures followed CBOT and KCBT wheat during a light volume trade session, a floor source said. Overall influence was seen from CBOT corn, he added.

 

"We trade as a subsidiary of what the other two wheat pits do," the source said. "I think those are kind of predicated on corn."

 

A lack of strong direction during the day session allowed inter-market spreading to move the market, the source noted. Traders were selling MGE against KCBT, he said.

 

Export sales figures did not garner much attention, the source said.