US Wheat Review on Thursday: Mostly lower on late fund liquidation

 

 

U.S. wheat futures ended mostly lower Thursday, falling into negative territory late in the session on month-end liquidation after trading higher most of the day, traders said.

 

Chicago Board of Trade September wheat ended down 4 cents to US$7.83 3/4 per bushel, Kansas City Board of Trade September wheat ended down 4 1/2 cents to US$8.14 3/4, and Minneapolis Grain Exchange September wheat ended up 1/2 cent to US$8.70 1/2.

 

The market failed to sustain its rally, as wheat closed lower for the fourth consecutive day. A trader said the market was vulnerable to the late, quick drop because of low volume. He added that UBS sold 800 contracts at the end of the day.

 

Wheat has little of its own fundamental news right now, and traders are wary of the market because of price swings. CBOT prices were more than 10 cents higher earlier in trading.

 

Analysts said the market was supported by the U.S. Department of Agriculture's Thursday report of net export sales at 726,400 metric tonnes for the week ended July 24.

 

"Export sales have been pretty good four weeks running, they've been better than expected, which is impressive considering how much competition comes from the Black Sea and a record world crop," said Louise Gartner, analyst for Spectrum Commodities.

 

Analysts said spread unwinding was a feature of trading Thursday, as wheat was higher throughout the day while corn dropped. The opposite was true on Wednesday.

 

"People are doing stupid things with the corn/wheat spread and I don't pretend to know why," the trader said.

 

There was little other fundamental news to boost the market, traders and analysts said.

 

Dale Durchholz, analyst with AgriViser, said the market appears to have found support around the US$8 level.

 

A floor analyst said the market did have some bearish news to digest Thursday. He noted that Argentina's government authorized the export of an additional 900,000 metric tonnes of wheat, according to a resolution published Thursday in the state bulletin.

 

Also, the International Grains Council projected world wheat production at 661.8 million metric tonnes, up from a June projection of 657.9 million metric tonnes.

 

Durchholz said the market has already factored in a record world crop, however.

 

The market has felt pressure this week by improved prospects for the Australian crop, which has been boosted by recent rains. A senior Australian wheat trader on the U.S. wheat tour in North Dakota said the rains have given the country "great potential" to produce a strong wheat crop in 2008-09 after growing areas suffered from drought for the last two years.

 

Rains in Western Australia and Queensland have improved crop conditions, although it's still too early to guarantee a big crop will be cut, said Simon Varley, senior wheat trader for GrainCorp Operations Limited.

 

Gartner said a return of adverse crop weather in Australia would prompt a rally in world wheat markets.

 

"I think really Australia holds the key to the near-term direction of wheat prices," Gartner said.

 

This week's wheat tour in North Dakota has produced few surprises, traders said. The tour ends Thursday in Fargo with the release of a total yield estimate around 3:45 p.m. EDT.

 

European Union licenses to export soft wheat rose 532,000 metric tonnes for the week ended July 29, E.U. data showed Thursday.

 

 

Kansas City Board of Trade

 

KCBT wheat followed the CBOT market lower, plunging after trading higher most of the day.

 

"We had an end-of-month, fund-selling type of deal," a trader said.

 

He said prices fell about 10 cents in the last 15 to 20 minutes of trading. There was little fundamental news in the market, he said.

 

 

Minneapolis Grain Exchange

 

MGE wheat closed slightly higher, although it trimmed its gains late. The market has been "kind of lackluster and range-bound," a trader said.

 

He added that the market is mostly commercial-driven, making it less volatile than the Chicago market.

 

"There was a little bit of game playing at the close," the trader said, as funds both bought and sold the September contract late.