December 25, 2007

 

US Wheat Review on Monday: Market finishes mixed as spreads correct

 

 

U.S. wheat futures closed mixed Monday as profit-taking and bearish demand news weighed on front-month contracts, traders said.

 

Deferred months rose, gaining on the nearby contracts as spreads corrected, they said.

 

Chicago Board of Trade March wheat fell 13 3/4 cents to US$9.35 1/4 a bushel. Kansas City Board of Trade March wheat slipped 4 3/4 cents to US$9.64, and Minneapolis Grain Exchange March wheat ended down 9 cents at US$10.69.

 

Egypt's state-owned General Authority for Supply Commodities canceled during the weekend a tender to buy at least 55,000-60,000 metric tonnes of wheat for shipment Jan. 21-31. The cancellation was seen as bearish for the nearby contracts. GASC did not provide a reason, but traders said it was because prices were too high.

 

The pool of bidders for GASC's business appears to be shrinking, a CBOT floor trader said. A breakdown of the bids showed offers from the U.S., Russia and some from Kazakhstan.

 

Traders also expect India to soon confirm that it's canceling a tender for wheat. India's government-owned State Trading Corp. will likely cancel a tender for 350,000 metric tonnes issued earlier this month on behalf of the federal government.

 

Canceled tenders tell the markets that prices have climbed too high, a CBOT floor trader said. The U.S. is not competitive on the global market, he said.

 

The markets have room to pull back after leaping to new all-time highs in recent sessions, traders said. There was no fresh fundamental reason to chase prices higher, they said.

 

Deferred months felt support from some unwinding of bear spreads, a CBOT floor broker said. The spreads are correcting as the nearby contracts trade at a sharp premium to the back months, he said.

 

CBOT July wheat, which represents the new crop, ended up 2 1/2 cents at US$7.92. CBOT September wheat climbed 4 1/4 cents to US$7.98 1/4.

 

Market activity was thin as many traders stayed home ahead of the Christmas holiday. Commodity funds sold an estimated 2,000 contracts at the CBOT. In pit trades, Fortis bought 200 July.

 

 

Kansas City Board of Trade

 

Trading was thin at the KCBT ahead of Christmas, a floor trader said. There was some pressure from speculation that recent moisture in the U.S. Plains was beneficial to the developing hard red winter wheat crop, he said.

 

By later this week, a pattern of storm north-dry south will develop in the continental U.S, according to a forecast from DTN Meteorlogix. The outlook features a mix of snow and some freezing moisture in the Great Lakes through Ohio Valley, and light to moderate rain in the Delta and parts of the Southeast. However, Plains wheat areas will be dry during the rest of the week, the weather firm said.

 

Spreads corrected toward the end of the day session, the KCBT trader said.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures largely followed activity at the CBOT, a MGE floor trader said. There was no fresh bullish news out, and there is sentiment that the U.S. wheat futures markets have topped after recent rallies to all-time highs, he said.

 

The U.S. Department of Agriculture is slated to release its weekly export inspections report Wednesday. The report, usually released Mondays, is delayed because of Christmas Eve and Christmas.