September 5, 2008


US Wheat Review on Thursday: Finishes mixed in choppy trade



U.S. wheat futures closed mixed and near unchanged Thursday amid ideas that recent sell-offs were overdone, and pressure from a firmer dollar.


Chicago Board of Trade December wheat settled up 2 1/4 cents at US$7.77 per bushel. Kansas City Board of Trade December wheat ended unchanged at US$8.19, and Minneapolis Grain Exchange December wheat finished down 3 1/4 cents at US$8.41 1/4.


CBOT wheat continued to bounce back on some short-covering after steep declines during the past two weeks, traders said. But strength in the U.S. dollar and bearish technical momentum weighed on prices, analysts said.


Chatter about the potential for a decline in the U.S. Department of Agriculture's estimate for a 25-million-tonne Australian wheat crop worked its way through the markets. The USDA will update its supply and demand estimates Sept. 12.


The managing director of Louis Dreyfus Commodities Australia Pty Ltd. said Thursday Australia's output may be 21 million to 22 million tonnes. Australian agribusiness AWB Ltd. (AWB.AU) Wednesday highlighted production forecasts of 20 million tonnes.


"All direct observations reinforce ideas that the USDA's current 25 (million metric tonne) production number is too high and will most likely begin being incrementally pared lower," AgResource Company said.


A drop in production Down Under would be supportive to U.S. wheat, as it would translate into fewer exports out of Australia, said Jason Britt, analyst and broker for Central State Commodities. Dryness has reduced Australia's output for the past two years.


Trading was choppy throughout the day session. Although CBOT wheat ended stronger, it was on a "shaky base," an analyst said.



Kansas City Board of Trade


KCBT wheat futures ended mixed, with the December contract finishing flat after trading both sides during the day session. The wheat markets were taking a "pause" after Wednesday's modest gains and losses in previous session.


Although Australia's crop may be smaller than expected, other countries are raising their respective production forecasts, said Tom Leffler, owner of Leffler Commodities in Kansas. Ukraine's agriculture ministry, for one, this week said 43.2 million metric tonnes had been harvested as of Sept. 1, about double the amount cut on the same date last year.


"Yesterday was the first bounce after seven days of sliding to the downside," Leffler said. "I just can't find anything out there to get excited about wheat."



Minneapolis Grain Exchange


MGE wheat futures traded both sides during the session. The market was seen mainly as a follower of CBOT wheat but was unable to hang on to gains, traders said.


The spring wheat harvest will slow down through early next week due to showers and continued coolness in the northern Plains, T-Storm Weather said in a forecast. Cutting was 81% complete as of Sunday, down from the average of 83%.


The USDA at 8:30 a.m. EDT Friday is slated to issue its weekly export sales report, one day later than usual due to the Labor Day holiday. Analysts expect U.S. wheat sales will be 100,000 to 350,000 tonnes.


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