August 2, 2008


US Wheat Review on Friday: Higher on short-covering, August positioning



An early surge and short-covering led U.S. wheat futures Friday to their first higher settlement in a week, traders said.


Chicago Board of Trade September wheat ended up 10 1/4 cents to US$7.94 per bushel. Kansas City Board of Trade wheat ended up 7 1/2 cents to US$8.22 1/4 and Minneapolis Grain Exchange wheat ended up 3 1/2 cents to US$8.74.


The market brushed aside weakness in corn and soybeans futures, which both fell sharply. A trader said there was buying of wheat and selling of corn in the pits but that it was difficult to say if spread treading was a dominant feature of screen trading.


First-of-the-month positioning boosted the market, said Tom Leffler, owner of Leffler Commodities.


"As far as fundamental news out there? I don't see anything," Leffler said.


CBOT prices jumped sharply in early trading, as funds bought 2,000 contracts on the open on screen trading. CBOT wheat was trading more than 25 cents higher before retreating. Weakness in corn and soybeans limited the upside potential, "capping our gains," a trader said.


Wheat continues to have "no story," traders said, but has been influenced by a range of factors. Strong export demand is seen by many as supportive, although analysts also note there is strong competition and that so far the U.S. hasn't been winning the business.


The market has dipped in recent weeks on harvest pressure, and most rallies have been seen as opportunities to sell, Leffler said.


Weather will be a factor in the market, even if it doesn't affect wheat specifically, an analyst said. He said soybeans usually hinge on the weather in August, and this year corn could be impacted by the weather because it has been planted late. Any rally in those markets due to the weather would spill over into wheat, he said.



Kansas City Board of Trade


KCBT wheat "found some strength versus corn and beans," a trader said.


Volume remained light, he said, although it was slightly more active Friday. He said trade was choppy.


The market is eyeing the weather for rainfall and potentially damaging heat, he said.


"Right now it's export demand and weather," a trader said. "That's what's been whipping us around."



Minneapolis Grain Exchange


MGE wheat remained a follower of CBOT wheat, a trader said.


"We were certainly passengers on this ride," he said.


Although the effect was not immediate, the trader and an analyst said they expect Minneapolis prices will climb on the results of this week's wheat tour in North Dakota. Projected yields below the U.S. Department of Agriculture's estimates, particularly for durum, should provide support in the weeks to come, they said.


"I think longer-term that will happen," the trader said.


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