US Wheat Review on Thursday: Erases Wednesday's gains on liquidation

 

 

U.S. wheat futures fell sharply Thursday, erasing Wednesday's gains amid long liquidation linked to ongoing nervousness about the health of financial markets.

 

Chicago Board of Trade December wheat fell 33 cents to US$6.92 3/4 per bushel. Kansas City Board of Trade December wheat dropped 27 1/4 cents to US$7.34 1/4, and Minneapolis Grain Exchange December wheat lost 25 1/4 cents to US$7.64.

 

The setback was a turnaround from Wednesday, when CBOT December wheat closed up 35 3/4 cents. Grains felt pressure from long liquidation and a retreat in crude oil, an analyst said.

 

"We had technical buying that got us rolling yesterday and that got us above US$7 in the December," said Jerry Gidel, analyst for North America Risk Management Services. "We sure didn't get a lot of follow-through."

 

Wheat tumbled despite solid weekly export sales, traders said. Total U.S. wheat export sales for the week ended Sept. 11 were 632,300 metric tonnes, above trade estimates of 300,000 to 550,000 tonnes.

 

"The sales were good," said Larry Glenn, broker/analyst for Frontier Ag. "Everybody is just so nervous. In today's case, it's just long liquidation."

 

It isn't encouraging that CBOT December wheat closed under psychological support at US$7, Gidel said. Key support for the contract is at US$6.65 a bushel and resistance is at US$7.30, according to a research note from Allendale.

 

 

Kansas City Board of Trade

 

Jitters about the financial sector fueled long liquidation in wheat, as the market continued to be affected by "repercussions of the financial crisis," an analyst said. The retreat in crude oil and weakness in CBOT corn, which briefly fell the exchange-imposed limit of 30 cents, added pressure, he said.

 

Weekly export sales of U.S. hard red winter wheat, traded at the KCBT, were strong, as it seems buyers are favoring higher protein wheat, a trader said. Of weekly 2008-09 sales of 657,300 tonnes, 302,000 tonnes were HRW wheat, used to make bread, according to the U.S. Department of Agriculture.

 

 

Minneapolis Grain Exchange

 

MGE wheat was a follower of the other markets, a trader said. The wheat markets couldn't hang on to overnight gains as crude oil weakened and corn tanked, he said.

 

Moving forward, fundamentals will likely continue to take a backseat to outside influences, analysts said. The U.S. financial sector and movements in crude oil and the U.S. dollar are key to the grains, they said.

 

"The outside markets and its emotions are still going to have a huge impact," Gidel said. "We're not totally trading what we should be trading."