December 12, 2006

 

US Wheat Review on Monday: Ends up on soybeans, low selling interest

 

 

U.S. wheat futures ended higher Monday in a rebound from sharp losses Friday fueled by spillover strength from soybeans and a lack of selling interest, sources said.

 

Chicago Board of Trade March wheat closed 4 1/4 cents higher at US$4.90 per bushel, Kansas City Board of Trade March wheat ended up 4 1/2 cents at US$5.11, and Minneapolis Grain Exchange wheat settled 3 1/4 cents firmer at US$5.02 1/4.

 

Wheat futures slipped to the downside early in the day session on light speculative selling that hit some stops, a trader noted. Spillover support from CBOT soybeans, however, supported a turnaround, he said.

 

As wheat moved to the upside, selling interest dried up, sources added. Some light speculative follow-through buying from firmer overnight trading was seen to help prices climb higher, a CBOT floor trader said.

 

Overall, trading was choppy and thin, sources said. In CBOT pit trades, funds sold an estimated 700 contracts.

 

Funds were net long 36,089 positions in CBOT wheat futures and options as of Dec. 5, the Commodity Futures Trading Commission reported. Funds increased their long positions by 5,589 contracts and decreased short positions by 1,406 contracts at CBOT, the CFTC said.

 

Commercials were net short 13,454 contracts at CBOT. Commercials increased longs by 1,788 contracts and increased shorts by 7,406 contracts, according to the CFTC.

 

The price gains during the day session came despite somewhat bearish new government estimates for larger wheat ending stocks and smaller U.S. wheat exports, sources said.

 

The U.S. Department of Agriculture supply-and-demand report released Monday was seen as neutral to slightly negative for wheat because it confirmed concerns about weak export business, sources said.

 

The USDA decreased its U.S. export estimate from 925 million in November to 900 million for December.

 

The USDA raised its estimate for 2006-07 U.S. wheat ending stocks to 438 million bushels, up from 418 million bushels in November. The agency also increased its global forecast for wheat production to 588.56 million metric tonnes, a 1.75-million-tonne increase from a month ago, because of stronger-than-expected production in countries like Argentina and Canada.

 

But the report did not weigh more heavily on futures prices because the adjustments were largely expected, analysts said.

 

In other news, Egypt over the weekend bought 115,000 metric tonnes of U.S. wheat. The news was friendly but not extremely bullish because of ongoing concerns about the pace of export sales, an analyst said.

 

Iraq said it will soon issue tenders to buy large quantities of wheat from foreign suppliers for delivery in 2007.

 

Argentina, meanwhile, said its 2006-07 wheat harvest was well ahead of last year's pace, with conditions generally good despite early drought. The lack of sufficient rainfall in November, however, affected yields in some areas of Buenos Aires Province, where 56% of Argentina's wheat is grown, officials added.

 

Argentina forecasts 2006-07 wheat production at 13.6 million tonnes, while on Monday the U.S. Department of Agriculture raised its production forecast to 14.2 million tonnes from the 13.25 million tonnes forecast last month.

 

 

Kansas City Board of Trade

 

The USDA report was particularly negative for KCBT wheat futures because the increase in U.S. ending stocks mainly involved hard red winter wheat stocks, an analyst said. KCBT trades HRW wheat.

 

Still, KCBT March wheat led the upside over CBOT March and MGE March wheat. A floor source said KCBT followed CBOT wheat and CBOT soybeans higher.

 

Activity during the day session was "very dead" and volume was thin, the source said. There were no big players, he added.

 

At KCBT, funds were net long 36,948 contracts as of Dec. 5, according to the CFTC. Funds lifted longs by 1,032 positions and shorts by 442.

 

Commercials were net short 30,376 contracts at MGE, the CFTC said. Commercials increased long positions by 468 contracts and short positions by 2,917 contracts, the CFTC said.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures followed CBOT prices to the upside, a floor source said. Volume was very light, and MGE did not have direction of its own, he added.

 

There was modest fund selling at the open, the source noted. After that, selling interest dried up, he said.

 

At MGE, funds increased long positions by 985 contracts and short positions by 192 contracts as of Dec. 5, the CFTC said. Funds were net long 11,563 contracts at MGE, according to the CFTC.

 

Commercials were net short 8,618 contracts, the CFTC reported. Commercials lifted longs by 777 long contracts and shorts by 1,190 contracts, the CFTC said.