May 20, 2008

 

US Wheat Review on Monday: Closes higher on Australia, technicals

 

 

U.S. wheat futures jumped Monday on concerns about dryness in Australia and in a rebound from recent losses, analysts said.

 

Chicago Board of Trade July wheat climbed 15 1/2 cents to US$7.91 per bushel. Kansas City Board of Trade July wheat rose 12 3/4 cents to US$8.37, and Minneapolis Grain Exchange July wheat gained 26 cents to US$10.30.

 

The catalyst for the rally was "disappointing rain events" in Australia during the weekend, said Chad Henderson, analyst for Prime Agricultural Consultants. Australia saw an increase in rain during the past 10 days, but moisture was on the light side in the majority of Queensland and New South Wales, according to Cropcast Agricultural Weather.

 

Queensland and New South Wales are the areas that have the most immediate need for moisture, as wheat seeding is under way there, Cropcast said. Conditions are expected to stay mostly dry for the next 10 days, except in Western Australia.

 

Drought has slashed Australia's wheat output for the past two years. Despite anxiousness about the weather, the country's production should recover in 2008-09, analysts said.

 

"Drought three years in a row?" asked Dale Durchholz, analyst for AgriVisor. "Your odds are getting kind of long."

 

Wheat saw some technical buying after the CBOT July contract briefly slipped below US$7.50 last week, an analyst said. There also was some unwinding of long corn/short wheat and long soybean/short wheat spreads, Durchholz said.

 

Despite the day's gains, CBOT July wheat is still well below its May high of US$8.44 and its 40-day moving average of about US$8.78, Henderson said. But it will be difficult for wheat to make a sustained move higher unless weak cash prices find some life, Henderson said.

 

 

Kansas City Board of Trade

 

KCBT wheat futures rose on technical buying and the Australia wheat concerns, a floor trader said. Weakness in the U.S. dollar also was supportive, he said.

 

 

Minneapolis Grain Exchange

 

MGE July wheat briefly climbed the 60-cent limit in low volume was trimmed gains before the close. There was light flat-price buying amid continued concerns about tight spring wheat supplies.