US Wheat Review on Tuesday: Markets rise in technical rebound

 

 

U.S. wheat futures jumped Tuesday in a technical bounce after recent setbacks.

 

Chicago Board of Trade September wheat closed up 5 3/4 cents at US$7.96 3/4 per bushel. Kansas City Board of Trade September wheat rose 1 cent to US$8.24, and Minneapolis Grain Exchange September wheat was unchanged at US$8.75.

 

Wheat was in an oversold condition and due for a rebound after CBOT September wheat Monday closed at a seven-week low, analysts said. Unwinding of short wheat/long corn and short wheat/long soybean spreads helped boost gains, they said.

 

CBOT and KCBT wheat are stuck "in a channel," with nearby September contracts holding below their 50-day moving averages but above 2008 lows, said Tom Leffler, analyst for Leffler Commodities. CBOT September wheat has a 50-day moving average of about US$8.31 and hit a 2008 low of US$7.47 on May 29.

 

"Both Kansas City and Chicago are holding under there," Leffler said, referring to the 50-day moving average. "They have to get over the 50-day to be bullish, or they have to take out the late May low, which is also the 2008 low, to get even more negative."

 

Moving forward, traders will keep an eye on the 50-day moving average and watch activity in the neighboring CBOT corn market, which has seem a sharp sell-off since hitting all-time highs last month, Leffler said. Corn and wheat are linked as both are used for animal feed.

 

"This corn market isn't going to continue to keep going down," Leffler said. "When it comes up, it's going to give some artificial support to the wheat market."

 

Commodity funds bought an estimated 3,000 contracts at the CBOT.

 

 

Kansas City Board of Trade

 

KCBT wheat futures rose in a rebound from oversold conditions, traders said. There are ideas that harvest pressure is easing, with hard red winter cutting seen as complete in the southern Plains, an analyst said.

 

"I really think more than anything we saw a technical bounce in wheat today," a trader said.

 

The 50-day moving average is US$8.67 1/2 for KCBT September wheat. The contract set a 2008 low of US$7.95 1/2 on May 29.

 

 

Minneapolis Grain Exchange

 

Nearby MGE September wheat finished unchanged, while MGE December wheat closed 5 cents higher at US$8.88. The market was watching CBOT wheat, with support seen there from technical buying and unwinding of CBOT corn/wheat spreads, a local trader said.

 

The U.S. Department of Agriculture said in its weekly crop progress report, issued Monday, that 63% of the U.S. spring wheat crop was in good to excellent shape as of Sunday, up from 61% the previous week. There are some dry areas in western North Dakota, but traders are growing more comfortable with the condition of the crop, said Brian Henry, broker for Archer Financial Services.

 

"There's going to be some areas that are going to dry out," he said. "The western Dakotas, that's just what happens. I think they're pretty comfortable with what they see on the horizon in terms of production."