August 30, 2008


US Wheat Review on Friday: Stumbles; world production, demand eyed



U.S. wheat futures ended lower Friday, struggling to find their footing amid record production, a lack of significant fresh export demand and technical weakness.


December CBOT wheat ended 9 3/4 cents lower at US$8.01 1/4, December KCBT wheat settled 7 3/4 cents lower at US$8.39 1/2, and December MGE wheat finished 3 1/4 cents lower at US$8.69 3/4.


Overall activity was slow despite the market's move to a new low for the current downward move, analysts said.


The market is continuing to watch export markets for direction, trying to price itself into new demand channels amid increased competition from record world output, said Shawn McCambridge, senior grains analyst with Prudential Bache in Chicago.


Technical weakness played a role in Chicago wheat's fall, with the most active December future dropping below support at Thursday's low and the psychological US$8.00 per bushel level.


The market lacks a steady flow of supportive inputs to push prices higher and end users were not presented with an incentive to chase the market, McCambridge added.


The defensive tone was consistent, with light end-of-the-month and pre-holiday weekend position evening providing light support, but traders were unwilling to aggressively buy breaks amid a lack of fresh demand news to provide fundamental support, analyst added.


Improved crop conditions for southern hemisphere wheat crops following recent rains in Australia and Argentina weighed on the market as well.


In CBOT pit trades, buyers and sellers were scattered among various commission houses, with speculative fund selling estimated at 2,000 lots.


CBOT markets will be closed Sunday night and will remain closed for Monday's day session in observance of the U.S. Labor Day holiday.


KCBT wheat futures ended lower in a very quiet trading session, a KCBT floor trader said. Light trade evening ahead of the extended holiday weekend was the feature of the day, with traders unwilling to take on added risk in the absence of fresh fundamental news, traders added. A higher U.S. dollar index added pressure to prices, but activity was thin as many participants were absent, getting a head start on the holiday weekend, a KCBT floor broker said.


MGE wheat futures ended lower, with spreading the featured attraction of the day. The September/December spread was the dominant feature, with the spread moving within a range of an 11 cent carry to 16 cents, floor traders said. Weakness in Chicago wheat applied some pressure, but selling interest remained muted, with commercial buying below the US$8.75 per bushel level in the December contract providing underlying support, a MGE floor broker said. Meanwhile, favorable weekend harvest weather was a bearish indicator, with light hedge related selling noted.

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