US Wheat Review on Tuesday: Trims gains after rally on Egypt, rebound

 

 

Short covering and a sale of U.S. wheat to Egypt boosted U.S. wheat futures Tuesday, although the markets pared gains at the close of trading amid setbacks in corn, soybeans and crude oil.

 

Chicago Board of Trade September wheat climbed 21 1/4 cents to US$7.80 per bushel. Kansas City Board of Trade September wheat rose 10 1/2 cents at US$8.06 1/2, and Minneapolis Grain Exchange September wheat jumped 11 1/4 cents to US$8.53 1/4.

 

CBOT September wheat climbed as high as US$8.04 during the session, as the market rebounded from a sharp sell-off Monday. A sale of 175,000 tonnes of U.S. soft red winter wheat, traded at the CBOT, to Egypt was seen as a bullish surprise for the market, analysts said.

 

Egypt's state-owned General Authority for Supply Commodities was expected to give the bulk of its business to the Black Sea region. GASC bought 120,000 tonnes of wheat from Russia and Ukraine.

 

Recent reports that Ukraine's crop may include more feed-quality wheat, as opposed to milling quality wheat, may have "scared the Egyptians off a little bit" from the Black Sea, said Dale Durchholz, analyst for AgriVisor. Egypt may have "shifted their buying pattern back to the U.S. and some other sources" that offer a reliable supply of higher quality milling wheat, he said.

 

"I thought the Egyptian buy overnight was really interesting," Durchholz said. "That was really a different twist to what was expected."

 

However, wheat's inability to hold prices nearer session highs was somewhat disappointing, a trader said. Corn and soybeans faded heading into the close and dragged down wheat, he said.

 

The performance in wheat will discourage traders from playing the short side aggressively, Durchholz said. Commodity funds bought an estimated 5,000 contracts of wheat at the CBOT.

 

"Wheat, I think, wants to go up, but until something else stops going down, wheat's going to have a difficult time sustaining gains," Durchholz said.

 

 

Kansas City Board of Trade

 

KCBT wheat futures ended up on short covering and spillover support from CBOT wheat, a floor trader said. The late break in CBOT corn and soybeans "precipitated the late break here," he said.

 

"Most of the leadership just seemed like it was coming out of the Chicago pit," the trader said. "We did not see a lot of paper in the pit. Certainly we were a follower today and not a leader."

 

 

Minneapolis Grain Exchange

 

MGE wheat futures followed CBOT wheat into positive territory. A bigger-than-expected decline in the U.S. Department of Agriculture's good-to-excellent rating for spring wheat also was seen as supportive, traders said.

 

The USDA, in its weekly crop-progress report, said 56% of the crop was in good to excellent condition as of Sunday, down four percentage points from the previous week. Market participants had expected the rating to drop two or three percentage points at most.

 

"We've been seeing our condition ratings fall away from us on the spring wheat," Durchholz said. In the previous progress report, for the week ended July 27, the USDA cut its spring wheat rating by three percentage points.