September 24, 2008


US Wheat Review on Tuesday: Rises late on short-covering, technicals



A late round of short-covering and technical buying pulled U.S. wheat futures higher Tuesday in thin volume.


Chicago Board of Trade December wheat climbed 12 3/4 cents to US$7.50 1/2 per bushel. Kansas City Board of Trade December wheat jumped 7 1/2 cents to US$7.81 1/2, and Minneapolis Grain Exchange December wheat climbed 12 3/4 cents to US$8.11 1/4.


CBOT December wheat ended near its session high of US$7.55. The contract's session low was US$7.25 3/4.


Solid technical resistance for CBOT December wheat is seen at Monday's high of US$7.57 3/4, analysts said. The market was due for some short-covering and position-squaring after a sell-off during the past month, they said.


"It looked like mostly technicals," Mike Zuzolo, an analyst for Risk Management Commodities, said about the late rally. "When the Dec wheat was able to hold that US$7.25 level, they wanted to try that US$7.50 level again."


Traders stepped to the sidelines after recent volatility and amid uncertainty about financial markets. Fed chief Ben Bernanke and Treasury Secretary Henry Paulson on Tuesday urged Congress to act quickly on bailout legislation and to avoid getting bogged down in unnecessary additions.


"It's such a yo-yo trade," said Jason Britt, analyst/broker for Central State Commodities. "How can you go out of here being long or short with any conviction? After awhile, you just get tired of getting whipsawed. You have to step away from it."



Kansas City Board of Trade


Short-covering boosted KCBT wheat futures in slow, late dealings, a floor trader said. Most of the activity was on the screen, she said.


"Everybody has their attention turned on to the financials," the KCBT trader said. "Fear is equating to the unknown, which is equating to the sidelines."


The grains could start to divorce themselves from the outside markets and to pay more attention to fundamentals once more yield data emerge on corn and soybeans, Britt said. Wheat also will continue to pay attention to demand, which has been solid lately, he said.


The U.S. Department of Agriculture said 116,000 metric tonnes of U.S. wheat were sold to an unknown destination in the 2008-09 marketing year. Of the total, 82,000 tonnes were hard red winter wheat and 34,000 tonnes were hard red spring wheat.



Minneapolis Grain Exchange


MGE wheat ended firmer with CBOT and KCBT wheat after the late run-up. MGE December wheat closed just off its session high of US$8.12.


The U.S. spring wheat harvest is nearly complete, with the crop 97% cut as of Sunday, on par with the average, the USDA said. U.S. wheat futures in general could emerge as more of a leader to corn and soybeans because wheat "does not have the pressure that the row crops face with harvest," Zuzolo said.


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