US Wheat Review on Wednesday: Tumbles on profit-taking, weak crude oil

 

 

Profit-taking and technical selling drove U.S. wheat futures lower Wednesday as the markets pulled back from recent gains amid pressure from weakness in crude oil.

 

Chicago Board of Trade December wheat fell 20 1/4 cents to US$7.30 1/4 per bushel. Kansas City Board of Trade December wheat dropped 22 1/2 cents to US$7.59, and Minneapolis Grain Exchange December wheat sank 14 3/4 cents to US$7.96 1/2.

 

Traders booked profits after wheat closed higher for three consecutive day sessions, an analyst said. Commodity funds sold an estimated 2,000 contracts at the CBOT.

 

"You had a big up day on Monday and held it on Tuesday and now you're giving it back," said Alan Brugler, president of Brugler Marketing & Management.

 

Wheat was higher overnight, but there was little follow-through support in the day session, a CBOT floor analyst said. The markets hit session highs near the opening of trading and quickly stumbled.

 

A setback in crude oil was a bullish influence on wheat, a CBOT floor analyst said. Crude is linked to the grains because funds often trade in a basket of commodities and because ethanol is made from corn.

 

There was not much fundamental support for wheat. The state-run Grain Board of Iraq purchased 100,000 to 200,000 metric tonnes of Russian wheat at US$300 a tonne FOB, and none from the U.S.

 

After the close of trading, Egypt's state-owned General Authority for Supply Commodities said it was tendering to buy at least 55,000 to 60,000 metric tonnes of wheat for shipment Oct. 21-31. GASC typically tenders for that amount and then buys more.

 

 

Kansas City Board of Trade

 

KCBT wheat pulled back after ending higher for the past two days. It was technically bearish that KCBT December wheat was unable to stay above its 18-day moving average, Brugler said. The contract closed below the average Tuesday and Wednesday.

 

"It's technical selling based on the failure to stay above the moving average resistance," Brugler said.

 

Traders kept an eye on outside markets like crude oil and on activity in Washingtonne, where Treasury Secretary Henry Paulson testified for a second day about the administration's US$700 billion plan to buy illiquid mortgage-related securities to help the economy. Grain traders remained on the sidelines amid uncertainty about how the bailout will unfold, an analyst said.

 

 

Minneapolis Grain Exchange

 

MGE wheat maintained its role as a follower of the other markets, a trader said. The setback in crude oil was a bearish influence, he said.

 

Forecasts for a record global wheat crop in 2008-09 remain bearish, despite concerns about a lack of rain in the Southern Hemisphere, a trader said. Showers in Western Australia should help relieve dryness, he said. The world is expected to produce more wheat than ever before after farmers expanded seedings to take advantage of high prices.