July 25, 2008

 

US Wheat Review on Thursday: Jumps on short covering, spread unwinding

 

 

Short covering and the unwinding of intermarket spreads carried U.S. wheat futures higher Thursday.

 

Chicago Board of Trade September wheat rose 4 1/2 cents to US$7.87 3/4 per bushel. Kansas City Board of Trade September wheat jumped 4 1/2 cents to US$8.16 1/2, and Minneapolis Grain Exchange September wheat ended up 4 3/4 cents at US$8.69 3/4.

 

The markets were due for a rebound after recent sell-offs, analysts said. There was some liquidation of short wheat/long corn spreads, which has been a feature in other recent sessions.

 

"Over the past week, you've seen a lot of spread unwinding," said Louise Gartner, analyst for Spectrum Commodities.

 

There continued to be a lack of fresh fundamental news for the markets to digest, traders said. Weekly export sales of 610,400 tonnes were seen as solid, with analysts predicting sales of 400,000 to 750,000 tonnes.

 

U.S. wheat export sales generally "have been holding up much better than we thought they would," considering forecasts for a record global crop and increased competition for export business, Gartner said. The U.S. will continue to struggle against aggressive offers from Black Sea countries, such as Ukraine, as the region's harvest progresses, she said.

 

"The Russians have a big crop, and they'll sell it at whatever it takes to move it," Gartner said.

 

Traders are keeping an eye on weather conditions in the Southern Hemisphere after drought slashed Australia's output for the past two years. The U.S. Department of Agriculture on July 11 raised its projection for 2008-09 production Down Under to 25 million tonnes, up 1 million tonnes from its June estimate and from about 13 million tonnes in 2007-08.

 

Wheat areas across the country have "frequent rain chances" through the end of the month, according to a forecast from T-Storm Weather. Australia will harvest its crop this fall.

 

"I think all eyes are on Australia," Gartner said. "We're penciling a pretty big crop."

 

 

Kansas City Board of Trade

 

Short covering and liquidation of short KCBT wheat/long CBOT corn spreads boosted the market, a floor trader said. Fund buying was estimated at 500 to 1,000 contracts, he said.

 

Volume was thin. Traders appeared indecisive, with "locals really jumping in and out of the market," the floor trader said.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures were seen as a follower of the other markets, a floor trader said. There was a small amount of commercial pricing.

 

"We've been a follower here for quite awhile," the trader said.

 

There has been some interest from growers in pricing wheat, but it doesn't seem as though there is a "big urgency to sell," a trader said. Producers still have money after MGE wheat climbed to all-time highs earlier this year, he said.

 

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