December 27, 2006

 

US Wheat Review on Tuesday: Ends firmer on CBOT corn, soy spillover

 

 

U.S. wheat futures closed modestly higher Tuesday on carryover technical strength from gains last week and with support from neighboring markets, traders said.

 

Chicago Board of Trade March wheat settled 2 3/4 cents higher at US$5.16 3/4 per bushel, Kansas City Board of Trade March wheat closed up 2 cents at US$5.20, and Minneapolis Grain Exchange March wheat closed 3 1/4 cents higher at US$5.21 1/4.

 

The main driver of wheat was CBOT corn and soybeans, said Roy Huckabay, analyst with the Linn Group.

 

CBOT corn is seen as the leader of wheat, and wheat felt spillover strength from corn during much of the day session, floor traders added. CBOT soybeans also ended solidly firmer.

 

The rally in wheat is expected to continue for the rest of the week as long as CBOT corn and soybeans maintain their strength, sources said.

 

"The wheat market is still a follow market," Huckabay said. "It's being tugged along with corn and beans."

 

The gains for wheat were off the day's highs, which came early in the session on follow-through buying from solid technical advances posted Friday, sources noted.

 

In CBOT pit trades, Man Financial bought 1,000 March, UBS bought 900 March, and Rand Financial bought 400 March. Fimat spread 700 May-March.

 

Funds helped boost prices by buying an estimated 2,000 contracts, a CBOT floor source said.

 

Funds were net long 19,716 positions at CBOT as of Dec. 19, the Commodity Futures Trading Commission reported Friday afternoon. Funds lifted longs by 168 contracts and shorts by 3,693 contracts, the CFTC said.

 

Commercials, meanwhile, were net long 4,398 positions, according to the CFTC. They increased longs by 11,289 and shorts by 6,667.

 

"There are a lot of people that feel like funds are long and they're dressing up the year-end close to make the books look good," Huckabay said.

 

The U.S. Department of Agriculture reported 13.633 million bushels of wheat were inspected for export for the week ended Dec. 21, on the low end of analysts' expectations of 12 million to 21 million bushels.

 

The inspections were up from the 11.767 million bushels inspected for export for the week ended Dec. 14. In the current market year to date, however, 464.984 million bushels have been inspected, down from 587.587 million at this time last year.

 

The inspections were lackluster but showed that export business is beginning to pick up, sources noted.

 

 

Kansas City Board of Trade

 

KCBT wheat futures followed CBOT corn and soybeans during the day session, a floor source said. There was no interest from the funds, he noted.

 

Funds were net long 28,666 positions at KCBT as of Dec. 19, according to the CFTC. Funds decreased longs by 2,131 contracts and increased shorts by 90, the CFTC reported.

 

Commercials were net short 21,174 positions at KCBT. They increased long positions by 1,016 and decreased shorts by 631, the CFTC said.

 

Volume during the day session was light and is expected to stay thin until the end of the year, the floor source added.

 

Forecasts for precipitation in some Plains hard red winter wheat areas are fundamentally bearish, an analyst noted.

 

Colder air from Canada is expected to drop south into the northern Plains around Wednesday, according to T-Storm Weather.

 

"This sets up an impressive north-south temperature contrast, and the result should be a major precipitation event for all agricultural areas," the weather service reported. "Hard red winter wheat areas across Nebraska and Kansas should receive another favorable round of moisture, though wheat to the south should miss best totals."

 

All but the far-southwest Plains through the Oklahoma and Texas Panhandle region will receive from 1/2 to 1 1/2 inches of precipitation, the DTN Meteorlogix weather firm added.

 

 

Minneapolis Grain Exchange

 

Trading at MGE was slow after the Christmas holiday and ahead of the New Year, a floor source said. Futures prices trailed gains in CBOT corn, he added.

 

At MGE, funds lifted longs by 1,207 and cut shorts by 722, the CFTC said. Funds were net long 13,974, according to the CFTC.

 

Commercials were net short 10,727 positions, the CFTC reported. They decreased longs by 353 contracts and increased shorts by 1,370 contracts.