US Wheat Review on Wednesday: Closes sharply higher on technical bounce

 

 

U.S. wheat futures closed sharply higher and near session highs Wednesday on technical buying and short-covering as the markets bounced from recent losses.

 

Chicago Board of Trade December wheat closed up 35 3/4 cents at US$7.25 3/4 a bushel. Kansas City Board of Trade December wheat jumped 27 cents to US$7.61 1/2, and Minneapolis Grain Exchange December wheat rose 34 1/2 cents to US$7.89 1/4.

 

The markets were due for a technical bounce after CBOT December wheat dropped more than US$2.70 from its Aug. 21 high to Tuesday's low, traders said. Commodities in general stabilized following the federal government's US$85 billion bailout of insurance giant American International Group (AIG).

 

Jitters about the health of the U.S. financial sector drove commodities lower Tuesday. But the government rescue of AIG "took a little of that risk feature out of the market," said John Kleist, analyst/broker for Allendale.

 

Ideas that wheat's recent price drop could stimulate world demand helped support the rally, Kleist said. Demand could shift to the U.S. from the Black Sea if concerns about low quality wheat become more pronounced, he said.

 

Egypt's state-owned General Authority for Supply Commodities on Wednesday said it bought 205,000 metric tonnes of wheat from Russia and Ukraine but none from the U.S. There was talk that U.S. soft red wheat was about US$25/tonne too expensive because of freight costs, a trader said.

 

 

Kansas City Board of Trade

 

KCBT wheat opened higher and gains "just kind of snowballed" in relatively light volume, a floor trader said. Technical buying and strength in outside markets helped give wheat a boost, he said.

 

"It was just kind of one of those deals where a lot of small buying just rallied it up, and there just weren't a lot of sales," the KCBT trader said. "It just seemed real choppy again today and airy."

 

 

Minneapolis Grain Exchange

 

Rallies in outside markets, including crude oil and gold, and weakness in the U.S. dollar supported wheat, a MGE floor trader said. The markets saw a "little bit of a commodity bounce" after commodities came under pressure Tuesday from financial woes, he said.

 

Although MGE wheat closed solidly higher, traders said they are not convinced the market has turned a corner. There is not much demand news out for wheat, a MGE trader said.

 

"I would like to see more U.S. wheat showing up on the global trade," he said. "Theoretically, we should be competitive now."

 

The U.S. Department of Agriculture at 8:30 a.m. EDT Thursday will release its weekly export sales report. U.S. wheat export sales for the week ended Sept. 11 are expected to be 300,000 tonnes to 550,000 tonnes, analysts said.