December 22, 2006

 

US Wheat Review on Thursday: Ends up with technical strength, on speculative buys

 

 

U.S. wheat futures climbed to a higher close Thursday on technical strength and with support from fund and speculative buying, sources said.

 

Chicago Board of Trade March wheat settled 9 1/2 cents higher at US$5.03 1/4 per bushel, Kansas City Board of Trade March wheat closed up 4 cents at US$5.08 1/4, and Minneapolis Grain Exchange March wheat closed 4 1/4 cents higher at US$5.08 1/2.

 

Trading was relatively thin ahead of the holidays, and that made it easier for modest orders to rally prices, sources said.

 

There was support from speculative bids and funds buying about 700 contracts, a CBOT floor trader said. In CBOT pit trades, Rand Financial bought 400 March and UBS bought 300 March.

 

"It doesn't take much to move the market around," said Vic Lespinasse, CBOT floor analyst for AG Edwards & Sons.

 

Technical strength also helped prices rally, analysts said. CBOT March wheat has closed well up from daily lows for the last several days and on Thursday closed above US$5.00 for the first time since Dec. 5, an analyst noted.

 

Weekly export sales released Thursday were "solid" and seen as another mildly supportive factor, Lespinasse said.

 

The U.S. Department of Agriculture reported U.S. wheat export sales for the week ended Dec. 14 were 455,100 tonnes, which was within analysts' expectations of 350,000 tonnes to 600,000 tonnes. The sales were 3% below the previous week but 2% over the prior four-week average, according to the USDA.

 

Top buyers were Japan, which took 131,000 tonnes, and Egypt, which took 114,000 metric tonnes, the USDA said.

 

The USDA, National Weather Service and National Drought Mitigation Center issued a Drought Monitor report that said abnormal dryness last week expanded rapidly across the contiguous U.S., including in some wheat growing areas.

 

Abnormal dryness, the official precursor to drought, and moderate drought expanded across eastern Oklahoma and southern Arkansas, reflecting moisture deficits that date back as much as two years, the report stated. A general lack of precipitation also allowed drought and dryness to expand in Iowa and Michigan, according to the report.

 

In other news, Argentina's year-on-year wheat exports rose 28% in September, the latest Agriculture Secretariat data show. Argentina exported 497,121 metric tonnes of wheat in September, compared with 388,285 tonnes shipped during the same month a year ago, according to the Secretariat.

 

Argentina produced 12.5 million tonnes of wheat in 2005-06, compared to 16 million tonnes a year earlier, according to the Secretariat.

 

Argentina's wheat miller federation reached an agreement to ship 150,000 to 200,000 metric tonnes of flour to Cuba next year, an increase of 50%, according to a spokesman and local press reports.

 

In 2005, Argentina shipped 95,000 tonnes of wheat flour to Cuba, according to the reports. The new agreement will make Cuba Argentina's third-largest export market behind Brazil and Bolivia.

 

 

Kansas City Board of Trade

 

KCBT wheat futures followed CBOT higher during the day session, a floor source said. Volume was lower than usual, and speculative buying boosted prices, he added.

 

U.S. export sales were seen as "decent" but not especially bullish, the source said.

 

"They didn't hurt us," he said about the export figures.

 

There also were supportive ideas that that index funds will be more active buyers of grain in 2007, the source said.

 

 

Minneapolis Grain Exchange

 

Inter-market spreading was a feature at KCBT during the day session, a floor source said.

 

Prudential, ADM and JP Morgan were buying KCBT March and selling CBOT March, he noted. UBS, meanwhile, was selling KCBT and buying CBOT, he said.

 

Fund buying came in late for a couple hundred contracts, the source added.

 

In other news, the future of the Canadian Wheat Board as the single-desk marketer of western Canadian wheat remains uncertain, as the country's minority Conservative government moves forward with its attempts to end the 70-year old institution's monopoly and create "marketing choice" for farmers.