September 13, 2008


US Wheat Review on Friday: Stumbles on lack of bullish news



Forecasts for a record world crop and a lack of bullish news pushed U.S. wheat futures lower Friday, despite strong rallies in the neighboring corn and soybean markets.


Chicago Board of Trade December wheat fell 7 cents to US$7.19 1/4 per bushel. Kansas City Board of Trade December wheat dropped 4 3/4 cents to US$7.59 1/2, and Minneapolis Grain Exchange December wheat slipped 3 1/4 cents to US$7.87 3/4.


The U.S. Department of Agriculture issued its September supply/demand report and raised its forecast for world wheat production to 676.3 million tonnes, up 5.5 million from August. The increase was expected and the report was generally seen as "neutral" for wheat, traders said.


"We've got a lot of wheat," said Sid Love, analyst for Kropf & Love Consulting. "We've got to feed a lot of wheat. Looking at the numbers, there wasn't anything really that dramatic in the wheat."


Traders had expected the USDA to trim its forecast for 2008-09 U.S. ending stocks, but the agency left the estimate unchanged at 574 million bushels. Demand is not strong enough to justify a drawdown in stocks yet, said Brian Hoops, president of Midwest Market Solutions.


Wheat climbed at the opening on spillover support from the row crops, with CBOT December wheat hitting a session high of US$7.42. However, the markets pulled back after corn showed some weakness, traders said.


But wheat couldn't muster a higher close when corn bounced back to end up its daily, exchange-imposed limit of 30 cents in the December contract. Corn and wheat are linked as both are used for animal feed.



Kansas City Board of Trade


Volume was "lackluster" at the KCBT, a floor trader said. The market jumped at the start of the day session on borrowed strength from CBOT corn and soybeans but could not hold on to the gains, he said.


"We needed a little bit of a bounce," the trader said. "Even though the report was kind of neutral for wheat, we rode the tails of beans and corn."


Wheat has been in a downtrend since a spike high Aug. 21. The markets are oversold and due for a bounce, but the fundamental storyline remains bearish, an analyst said.



Minneapolis Grain Exchange


MGE wheat futures closed lower on the lack of bullish news, a floor trader said. There is not much support at the current price level, he said.


"There's nothing out there really to support this wheat," the trader said.


The USDA's small grains report will provide traders the next batch of fundamental data on the U.S. crop. The report, due out Sept. 30, includes estimates on wheat production and yields.


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