December 23, 2006
US Wheat Review on Friday: Ends higher on technical strength, fund buying
U.S. wheat futures closed solidly firmer Friday with gains underpinned by technically-inspired fund buying during an abbreviated trading session.
Chicago Board of Trade March wheat settled 10 3/4 cents higher at US$5.14 per bushel, Kansas City Board of Trade March wheat closed up 9 3/4 cents at US$5.18, and Minneapolis Grain Exchange March wheat closed 9 1/2 cents higher at US$5.18.
Technicals were the key driver of prices during the day session, an analyst said. Wheat started building its technical strength earlier in the week as it posted gains despite bearish weather forecasts for the Plains, he added.
On Friday, CBOT March wheat built on solid advances from Thursday's day session and climbed to its highest close since Dec. 5. CBOT March wheat closed just below the session high of US$5.15.
CBOT March wheat opened stronger but briefly slipped into negative territory early before recovering and pushing higher.
Funds supported the rally by buying an estimated 2,000 contracts, traders said. There also was some speculative buying and short-covering, sources noted.
In CBOT pit trades, Calyon bought 600 March and sold 300 March. Iowa Grains bought 700 March, while Man Financial bought 500 March.
There also was some bullish influence from ideas that wheat prices may increase in 2007 if index funds increase their long positions in grains, a source added.
"The upside was the path of least resistance," he said. "We just kept going higher."
Trading was relatively thin with fewer participants in the markets ahead of Christmas, sources said. The CBOT, KCBT and MGE closed early at noon CST Friday and will be closed Monday in observance of the holiday.
During the Christmas holiday weekend, the DTN Meteorlogix forecast calls for mostly dry conditions and above-normal temperatures in some U.S. winter wheat growing areas. This warm weather will allow winter wheat in the Plains to avoid cold-weather stress, the weather firm said.
In the eastern Midwest, rainfall of up to one inch is in store for Friday through early Saturday, although there will be few major problems with the moisture due to a lack of freezing temperatures, Meteorlogix added.
Showers with up to one inch of rain will occur in Argentina's central crop belt during the coming weekend, the firm said. Next week, however, offers the potential for drier and notably hotter conditions from Wednesday through Saturday, Meteorlogix said.
"This feature does not appear to be a threat to crops at this time due to recent beneficial showers, but the hot-weather development will bear close monitoring for the prospect of becoming a longer-term feature than just a few days in duration," the firm reported.
Trading volume is expected to remain thin next week ahead of the new year. There are some thoughts that recent rallies may have overstretched wheat and that profit-taking will move prices lower.
Kansas City Board of Trade
Short-covering inspired by strength in outside markets pushed KCBT wheat futures higher, a floor source said. Volume was light overall ahead of the holiday, he noted.
There was no significant fund buying, the source said.
Minneapolis Grain Exchange
Fund and speculative buying pushed prices higher and triggered some stops, a floor source said. MGE wheat futures also followed CBOT prices higher, he said.
"Chicago rallied and we were kind of on the coattails of that market," he said.
In other news, the Canadian Wheat Board is handing out Christmas bonuses to its 500 employees in recognition of the "stress" and "strain" they have been under during the grain marketing agency's ongoing dispute with the federal government, according to a press report.
The bonus is raising concerns among farmers and among CWB employees who are wondering whether it is "hush money" designed to buy their silence in what has become a pitched political battle over the future of the world's largest marketer of wheat, the report stated.
