September 18, 2008

 

US Wheat Review on Monday: Bounces on short-covering

 

 

Chicago Board of Trade December wheat closed up 7 3/4 cents at US$7.27 a bushel. Kansas City Board of Trade December wheat rose 4 cents to US$7.63 1/2, and Minneapolis Grain Exchange December wheat jumped 1 1/2 cents to US$7.89 1/4.

 

The markets were due for a technical bounce after tumbling during the past three weeks, traders said. Wheat has been in a technical downtrend since a spike high Aug. 21.

 

"There's a feeling that we've come down a long way, and this is an area that we need to consolidate," Farm Futures analyst Arlan Suderman said. "We'd come down so far and in a relatively short amount of time that there was a reluctance to go lower."

 

CBOT December wheat on Friday closed down US$2.40 1/4 from the Aug. 21 high of US$9.59 1/2. One of the factors that helped wheat rise was that funds were already short, or sold, the market, Suderman said. Non-commercial speculative funds were net short CBOT wheat futures and options by 31,998 contracts as of Sept. 9, according to a supplemental report issued Friday by the Commodity Futures Trading Commission.

 

Wheat was weaker in early trading on pressure from crude oil and worries about the health of the U.S. financial sector. Lehman Brothers Holdings Inc. (LEH) filed for bankruptcy and Merrill Lynch & Co. (MER) sold itself to Bank of America Corp. (BAC).

 

KCBT wheat saw a bounce after recent sell-offs, but the modest gains weren't enough to alter the market's technical trend, a trader said. Deferred KCBT wheat futures closed lower.

 

The fundamental outlook for wheat remains bearish, traders said. The world in 2008-09 is expected to produce more wheat than ever before after farmers expanded plantings to take advantage of high prices.

 

"I don't know that anyone's ready to turn overly bullish at this point," Suderman said.

 

U.S. winter wheat should be 12% complete in Monday's crop progress report, the same as last year and down from the five-year average of 16%, Citigroup said in a note. The U.S. Department of Agriculture's weekly progress report is due out at 4 p.m. EDT.

 

MGE wheat futures closed mostly higher on technical buying. March wheat slipped 2 1/4 cents to US$8.03 1/4.

 

The U.S. spring wheat harvest is seen at 93% complete, up from 87% last week, Citigroup said. Harvest data indicates an average protein of 14.5%, although exporters are reporting lower protein HRS wheat is available to them, U.S. Wheat Associates said in a report. Producers may be storing higher protein HRS wheat, hoping to capture higher prices later in the marketing year, it said.