February 1, 2007

 

US Wheat Review on Wednesday: Settles up on position squaring, technicals

 

 

U.S. wheat futures finished higher Wednesday and near session highs, shrugging off late corn weakness as technical buying along with end-of-month position squaring and stronger outside markets helped prices settle higher, sources said.

 

CBOT March wheat rallied 8 cents to US$4.67 1/2, KCBT March wheat rose 7 cents to US$4.88 3/4, and MGE March wheat settled 5 3/4 cents higher to US$4.95 1/4.

 

Spillover from a steady tonnee in overnight activity as well as speculative- led technical buying provided support in early trading, sources said.

 

A rebound to higher levels in energy and metals futures also added support as wheat followed the outside markets, a CBOT floor trader said.

 

End-of-month position-squaring after recent weakness also underpinned the market, floor sources added.

 

"The market scaled up over its 10-day moving average and that brought technical fund buying back in," said Mike Zuzolo, chief analyst at Risk Management Commodities in Lafayette, Ind.

 

With Wednesday's gains a move above US$4.75 in CBOT March is possible near-term, Zuzolo noted.

 

Current wheat fundamentals center on the cold weather forecasts for the Midwest and the potential for some of the Midwest soft red growing areas to be at risk, Zuzolo noted.

 

A lower-than-expected stocks estimate from Statistics Canada before the market opened also provided support, sources said. Statistics Canada reported that wheat stocks as of Dec. 31, 2006, were 22.3 million metric tonnes compared to December 2005 stocks of 23.9 million, they said.

 

On daily open auction charts, March wheat settled above its 10-day and 20-day moving averages for the first time since Jan. 23.

 

In CBOT trades, Man Financial bought 1,500 July, Fimat bought 1,000 March and Rand Financial bought 300 March. UBS sold 400 March and Fimat sold 300 March.

 

In options trading, JP Morgan bought 1,000 July US$4.70 puts and sold 1,000 July US$5.10 calls.

 

Commodity fund buying was estimated at 3,000 contracts.

 

 

Kansas City Board of Trade

 

Hard red wheat futures settled higher, following the tonnee set in Chicago with additional strength on the close from end-of-month fund buying, KCBT floor sources said.

 

Other than the funds late in the day, hard red wheat followed CBOT futures, a floor source added.

 

Spread activity was noted, with participants rolling out of March and into May, with spread trading estimated at 1,000 contracts.

 

On daily open auction technical charts, KCBT March settled above its 20-day moving average but just below its 10-day moving average.

 

In mid-day KCBT trades, Fimat bought 100 March, 100 May, 100 July and 100 December. JP Morgan sold 200 March.

 

 

Minneapolis Grain Exchange

 

Spring wheat futures finished higher as month-end position squaring provided support for higher prices as did stronger outside markets, an MGE floor trader said.

 

Trading was quiet, with some March-May and May-July spreading noted, the broker added.

 

Lower-than-expected Canadian wheat stocks provided thin support, sources said.

 

On technical charts, MGE March wheat settled above its 20-day and 200-day moving averages.

 

On Thursday, the U.S. Department of Agriculture is scheduled to release its weekly export sales report for the period ending Jan. 25. Analysts expect wheat export sales between 350,000 and 650,000 metric tonnes.