US Wheat Review on Wednesday: Ends at 1-week highs on spillover support
Strong outside markets and technical buying helped U.S. wheat futures close at one-week highs Wednesday.
Chicago Board of Trade March wheat climbed 20 cents to US$5.09 1/2 a bushel, the contract's highest close in a week and its first close above US$5 in a week. Kansas City Board of Trade March wheat jumped 16 1/4 cents to US$5.31 1/4, and Minneapolis Grain Exchange March wheat soared 21 1/2 cents to US$5.90.
The markets felt support from weakness in the U.S. dollar and advances in crude oil, CBOT soybeans and corn, traders said. The grains have been looking toward outside energy and equity markets for direction lately amid worries about the economic downturn, and a soft dollar makes U.S. grains more attractive to foreign buyers.
There was some short-covering and positioning ahead of the release of the U.S. Department of Agriculture's December supply and demand report at 8:30 a.m. EST Thursday, analysts said. Wheat was due for a bounce after weak outside markets dragged grains sharply lower last week, traders said.
The USDA report will include fresh estimates on 2008-09 U.S. wheat ending stocks and on world wheat production, although traders don't expect the data to be a major factor in the markets. The average of analysts' estimates for U.S. wheat carryout is 596 million bushels, down slightly from the USDA's November estimate of 603 million, according to a Dow Jones Newswires survey of 13 analysts.
"As usual, the December [report] will be a yawner and we'll be trading something else in about 3 minutes," said Jim Gerlach, president of AC Trading.
The USDA on Thursday also will issue its weekly export sales report. U.S. wheat export sales for the week ended Dec. 4 are expected to be 200,000 to 350,000 tonnes, analysts said.
Kansas City Board of Trade
KCBT wheat futures rose on spillover strength from gains in crude oil and CBOT soybeans, a floor trader said. The rally was "more technical in nature" as wheat found some momentum to the upside, she said.
"The selling pressure has simply subsided, and the buyers are kind of stepping in," the KCBT trader said.
There was some positioning ahead of Thursday's supply/demand report, traders said. Analysts expect the USDA to raise its estimate for Canada's wheat crop following an increase from Statistics Canada. Statistics Canada last week raised its forecast for all-wheat production to 28.611 million tonnes from 27.266 million. The USDA in November put Canada's crop at 27.3 million.
Minneapolis Grain Exchange
MGE wheat led the upside with support from firming cash prices for hard red spring wheat, a floor trader said. There is a general sense of "tightness" as farmers are waiting for higher prices before selling their supplies, he said. It is unknown how much HRS wheat is left on the farms.
"I think finally people are just starting to use up the stocks that they bought earlier this spring," the MGE trader said.
MGE March wheat closed at a 3/4-cent premium to the May contract month. May wheat rose 23 1/4 cents to US$5.89 1/4.