December 20, 2006

 

US Wheat Review on Tuesday: Ends mostly higher on spillover strength

 

 

U.S. wheat futures ended mostly firmer Tuesday in a turnaround from early losses buoyed by spillover strength from neighboring markets, traders said.

 

Chicago Board of Trade March wheat ended 4 1/2 cents higher at US$4.92 a bushel, Kansas City Board of Trade March wheat closed down 1 cent at US$5.02, and Minneapolis Grain Exchange March wheat settled 1/4 cent stronger at US$5.02 1/4.

 

CBOT corn and soybeans also ended higher and provided support to wheat during the day session, sources noted.

 

"Wheat is following corn," said Louise Gartner, analyst with Spectrum Commodities. "Wheat is just tagging along."

 

The gains came as part of "Turnaround Tuesday" activity after wheat futures suffered losses Monday, a CBOT floor trader added. There was some short covering ahead of the new year, he said.

 

Funds also provided strength by buying an estimated 2,500 contracts at CBOT, sources said.

 

Otherwise, there was little fresh fundamental news for wheat to rally on, an analyst added. Export business remains sluggish and disappointing, traders said.

 

Japan said it was seeking 140,000 metric tonnes of wheat in a tender to be concluded Thursday for shipment Jan. 16-Feb. 15, although the business was seen as routine, sources said.

 

Weather forecasts that call for precipitation in the U.S. Plains, meanwhile, are seen as bearish, traders added.

 

The next two to three days feature a high likelihood of winter storm conditions in the Plains wheat areas, spreading north into the western Midwest, the DTN Meteorlogix weather firm reported. Moisture will be significant across the entire region, with melted precipitation of 1/2 to 1 1/2 inch, along with locally heavier amounts, the firm noted.

 

Most of western Kansas through the Oklahoma and northern Texas Panhandles will have two to six inches of moisture in a mix of snow and sleet, Meteorlogix noted. Drier weather will move into the Southern Plains by Friday, the firm said.

 

"The snowstorm and the rain event moving through the Plains is one of the few fundamental things we have to look at," Gartner said. "It's going to be termed negative."

 

Wheat futures were on the defensive early during the day session in line with weaker overnight action and without fresh news to direct prices, CBOT floor sources noted.

 

Overall, trading was quiet ahead of the Christmas holiday and going into the new year, sources said.

 

In CBOT pit trades, Citigroup bought 1,000 March, while Man Financial bought 600 March, and Fimat bought 500 March. Iowa Grains sold 400 March.

 

Looking ahead, trading is expected to stay choppy and thin through the end of the year, sources said.

 

"You could see some volatility," Gartner said. "You just don't have the traders there. You don't have the volume."

 

 

Kansas City Board of Trade

 

KCBT wheat futures followed CBOT corn and soybeans higher for a good part of the day session, a KCBT floor source said. KCBT March wheat, however, stumbled into negative territory shortly before the close.

 

"We had already reached our peak for the day," the source said.

 

There was some short covering seen, he noted. Otherwise, buyers were scarce, and trading activity was thin ahead of the holidays, he said.

 

Wheat needs stronger CBOT corn prices or bullish export news to rally, the source added.

 

"Otherwise, we'll just flounder," he said.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures ended modestly higher after following CBOT wheat to the upside, a MGE floor source said. There was no fresh news out to provide direction, he noted.

 

"It's December; we're flopping around," the source said.

 

In other news, a Winnipeg Commodity Exchange committee is considering making changes to the feed wheat contract, according to a press release from the WCE. One change under consideration would ensure merchant participants initiating new deliveries and anyone making re-deliveries against the feed wheat futures contract would be paid in full by the long, upon delivery through the clearinghouse.

 

WCE staff will review the proposed changes further and make their recommendations early next year, the release stated.