December 9, 2006

 

US Wheat Review on Friday: Lower on technical weakness, slow exports

 

 

U.S. wheat futures closed lower Friday with technical weakness, long liquidation and continued disappointment over slow export sales dragging prices firmly to the downside, traders said.

 

Chicago Board of Trade March wheat closed 10 cents lower at US$4.85 3/4 per bushel; Kansas City Board of Trade March wheat ended down 7 1/4 cents at US$5.06 1/2; and Minneapolis Grain Exchange wheat settled 10 cents lower at US$4.99.

 

CBOT March wheat pushed to three-week lows, while KCBT March wheat hit another two-month low, sources noted.

 

Wheat is seen as a follower of CBOT corn, but technical weakness and a lack of buyers kept wheat lower even as corn futures temporarily moved to the upside during the day session, a CBOT floor trader added. Funds continued to liquidate long positions to collect profits before the end of the year, he said.

 

There was little fundamental news to direct wheat prices, and trading was mostly quiet, sources said. In CBOT pit trades, Fortis sold 1,000 March, while Fimat and Man Financial each sold 300 March. JP Morgan spread 400 July/March.

 

Concerns about the slow pace of export business pressured prices ahead of the Monday's scheduled release of the U.S. Department of Agriculture's December supply and demand report, traders said. Analysts surveyed by Dow Jones Newswires expected the USDA to increase ending stocks in the report because of weak export sales.

 

Despite tightened global supplies, U.S. wheat prices are too high to attract export business, sources said.

 

"The market knows stocks are tight," an analyst said. "It also knows demand wasn't there at high prices. It's seeking a new level to get demand back in."

 

There are ideas among traders that wheat needs to go lower to feed values, added Roy Huckabay, analyst with the Linn Group.

 

"A lot of the users that we thought would be in here buying wheat have held back," he said.

 

European Union 2006-07 soft wheat production is now estimated at 110 million metric tonnes, down 5% on the year, according to the E.U.'s organization of grain traders.

 

In France, the largest grain producer in the E.U., the soft wheat harvest was estimated at 33.4 million tonnes, down from 34.9 million tonnes a year earlier. Total French grain production for 2006-07 is forecast at 60.8 million tonnes, down from 63.5 million tonnes in 2005-06.

 

Germany's soft wheat output for 2006-07 was seen at 22.5 million tonnes, down from 23.6 million the previous season. Germany's total grain output is projected at 43.4 million tonnes, down from 45.9 million tonnes a year earlier.

 

In other news, the Commodity Futures Trading Commission on Friday afternoon is scheduled to release the weekly Commitments of Traders Report for the period ended Dec. 5.

 

 

Kansas City Board of Trade

 

Ongoing long liquidation drove KCBT March wheat prices lower, a floor source said. The contract closed below key moving averages amid profit-taking and continued disappointment over export business, he noted.

 

There are bearish expectations that the USDA report will increase ending stocks and that the increase will be primarily in hard red winter wheat, he added. HRW is used to make bread and traded at KCBT.

 

"There's not a lot of support out there right now for hard red wheat," he said.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures followed CBOT wheat to the downside, a MGE floor source said. Trading was quiet without much direction outside of leadership from CBOT, he added.

 

Export sales continue to look slow, and traders want to take profits before the holidays, the source said.

 

There was some inter-market spread activity with traders selling MGE against KCBT, he noted