October 1, 2008

 

US Wheat Review on Tuesday: Ends mostly up on USDA, short-covering

 

 

A supportive U.S. Department of Agriculture quarterly stocks estimate and short-covering pushed U.S. wheat futures mostly higher Tuesday.

 

Chicago Board of Trade December wheat closed up 12 cents at US$6.80 a bushel. Kansas City Board of Trade December wheat rose 7 cents to US$7.12, and Minneapolis Grain Exchange December wheat ended flat at US$7.46 3/4.

 

The USDA pegged U.S. wheat stocks as of Sept. 1 at 1.857 billion bushels, below the average analyst estimate of 1.932 billion. The lower-than-expected estimate indicates more wheat was used as feed during the first quarter than previously thought, analysts said.

 

Analysts had expected the stocks number to be larger because of expanded U.S. production. The USDA put all wheat production at 2.5 billion bushels, above the average analyst estimate of 2.459 billion and the USDA's August estimate of 2.462 billion.

 

"It all has to do with the stocks estimate," Sid Love, analyst for Kropf & Love Consulting, said about the day's gains. "Production was up and stocks were down, which indicates that we had theoretically record feed use in that quarter."

 

Short-covering helped the rally heading into the end of the month and the end of the quarter, Love said. Non-commercial speculative funds were net short CBOT wheat futures and options by 35,741 contracts as of Sept. 23, the Commodity Futures Trading Commission said in its most recent supplemental report.

 

"Everybody's short and thank goodness because we need some of a bounce," Love said.

 

Wheat has been in a technical downtrend for the past six weeks, an analyst said. The day's gains are not enough to reverse the technical trend, he said.

 

CBOT December wheat traded within Monday's trading range. Commodity funds bought an estimated 2,000 contracts.

 

Kansas City Board of Trade

 

KCBT wheat futures ended higher as the wheat markets bounced along with crude oil and financial markets, a trader said. The markets rebounded from heavy sell-offs Monday.

 

The USDA's quarterly stocks number was seen as friendly, a trader said. The USDA also cut its forecast for production of hard red winter wheat, traded at the KCBT, to 1.035 billion bushels from 1.055 billion in August. The average of analysts' pre-report estimates was 1.053 billion.

 

Minneapolis Grain Exchange

 

MGE December wheat closed unchanged despite the gains in nearby CBOT and KCBT wheat. MGE May wheat slipped 1/2 cent to US$7.61 3/4.

 

It was a bearish surprise that the USDA raised its spring wheat production estimate to 547 million bushels from 501 million in August, a trader said. The average of analysts' pre-report estimates was 495 million, illustrating they expected to see a decrease.