December 21, 2006

 

US Wheat Review on Wednesday: Ends higher after range-bound trading day

 

 

U.S. wheat futures drifted to a modestly higher close Wednesday after a quiet, range-bound trading session that saw prices chopping around with little direction, sources said.

 

Chicago Board of Trade March wheat ended 1 3/4 cents higher at US$4.93 3/4 a bushel, Kansas City Board of Trade March wheat closed 2 1/4 cents firmer at US$5.04 1/4, and Minneapolis Grain Exchange March wheat settled 2 cents higher at US$5.04 1/4.

 

Volume was thin during the day session, and the firmer close doesn't carry any long-term significance, an analyst said. There was some late short-covering that pulled prices higher, he said.

 

Wheat futures opened stronger on light follow-through buying from the overnight and off a rally Tuesday, sources noted. Strength in the neighboring CBOT corn market also gave wheat support, they said.

 

Early buying was exhausted, however, and CBOT corn lost some of its early strength, a CBOT floor trader added. Corn, seen as the leader of the grains, ended mixed.

 

Interest in trading grains was low ahead of the holidays, and trading activity will probably stay choppy through the end of the year, sources said.

 

"I think traders are looking forward more to Christmas than the wheat market," an analyst said.

 

Looking toward 2007, market participants expect global wheat production will increase, sources said. Those expectations are already putting pressure on futures prices, they said.

 

Argentina's Agriculture Secretariat on Wednesday increased its estimate for 2006-07 wheat production to 13.7 million tonnes, up from 13.6 million tonnes last month.

 

As of Dec. 14, Argentine farmers had brought in 51% of the 2006-07 wheat crop, compared to 46% at this time last year, according to the Secretariat. This month, the U.S. Department of Agriculture raised its production forecast for Argentina to 14.2 million tonnes from the 13.25 million tonnes forecast last month. The Buenos Aires Cereals Exchange puts production at 13.8 million tonnes.

 

In other news, the CBOT lowered the minimum initial margin requirement to US$1,553 per contract from US$1,688. CBOT decreased the maintenance margin from US$1,250 to US$1,150 and the hedge margin from US$1,250 to US$1,150.

 

The U.S. Department of Agriculture on Thursday is slated to announce weekly U.S. wheat export sales. Analysts surveyed by Dow Jones Newswires estimated sales would range from 350,000 metric tonnes to 600,000 tonnes.

 

 

Kansas City Board of Trade

 

Mostly, movement for KCBT wheat futures was range-bound, a floor source said. There was little interest in trading wheat ahead of the holidays, he added.

 

Trading was choppy trading with some bearish pressure from precipitation hitting the Plains, the source said.

 

By early Wednesday morning, some key locations in the Southern Plains wheat belt had already received notable precipitation for the first time in more than two months, the DTN Meteorlogix weather said.

 

For the balance of Wednesday through late Thursday, the weather firm called for rainfall of up to 1 1/2 inches in northern and central Kansas, an additional 3/4 inch in southern Kansas south to north-central Texas, and up to 1/2 inch additional moisture in southwest Kansas through the Texas Panhandle.

 

"This moisture will soak into the ground quickly and give a notable boost to winter wheat," Meteorlogix said.

 

 

Minneapolis Grain Exchange

 

There was some light buying at the end of the day session spurred on by a Japanese tender, a MGE floor source said. Overall, trading was quiet, he added.

 

"There was not much going on here," the source said. "My guess is we'll probably see this through the end of the year."