June 26, 2008


US Wheat Review on Wednesday: Soars on technical buying, short-covering



Short-covering and technical buying catapulted U.S. wheat futures sharply higher Wednesday.


Chicago Board of Trade September wheat climbed 32 1/4 cents to US$9.20 1/4 per bushel. Kansas City Board of Trade September wheat surged 30 cents to US$9.54 3/4, and Minneapolis Grain Exchange September wheat jumped 25 cents to US$9.92 3/4.


Speculative funds were net short CBOT wheat by 26,094 contracts in the most recent Commodity Futures Trading Commission supplemental report, issued Friday, and appeared to be covering some of those positions, analysts said. There was some bullish chatter about continued harvest delays due to wetness in the Midwest and the Plains, although a big crop is still expected in the U.S.


It seems as though the rally was "overblown," said Doug Houghtonne, analyst for Brock Associates. There may not be much more upside for wheat, unless CBOT corn and soybeans soar, he said.


"I'm not sure that there's a huge upside beyond last week's highs, and we stopped right there at those today," Houghtonne said. "If we do close above those highs, then I think you look for September Chicago wheat to head for US$10."


Last week's high for CBOT September wheat was US$9.30. The contract Wednesday hit a session high of US$9.29.


It was "amazing" that wheat would rise and lend strength to corn and soybeans even when crude oil was weaker, Houghtonne said. Crude oil often provides direction to the grains and soy.


"Chicago (wheat) kind of took off on technical buying," a trader said. "We were sitting right on some major support levels. The funds were short Chicago wheat. They've got to be getting pretty close to even after this past week."



Kansas City Board of Trade


Fund buying boosted KCBT wheat futures, a floor trader said. Traders continued to roll positions to September from July, although it was not as big of a feature Wednesday as Tuesday, he said.


There were varying opinions on the market impact of an embargo on a small amount of Kansas wheat due to fungicide testing. A trader said the embargo seemed to sideline some sellers, while others said the news did not create major waves.


State regulators put an embargo on wheat at three grain elevators and in 20 fields covering 1,545 acres in south-central Kansas until tests confirm that fungicide residues meet tolerances set by the federal government. Kansas decided to prohibit the embargoed wheat from moving or mingling with other grain as a precaution after spot checks showed commercial operations may have applied a fungicide, Quilt, too close to harvest.


"That's kind of a non-issue," said Tom Leffler, owner of Leffler Commodities, based in Augusta, Kan. "It's really kind of an isolated deal."



Minneapolis Grain Exchange


Technical buying and gains in the other wheat markets pulled MGE wheat higher, a floor trader said. There also was some support amid strong demand from Japan, another trader said.


There continued to be a lack of farmer selling at the MGE, a trader said. Weather for spring wheat in the northern Plains looks "ideal" following recent showers, he said.


The U.S. Department of Agriculture is due to issue its weekly export sales report at 8:30 a.m. EDT. Analysts expect wheat export sales for the week ended June 19 to total 300,000 to 550,000 tonnes.


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