October 18, 2008

 

US Wheat Review on Friday: Advances on short-covering, spillover

 

 

Short-covering and gains in neighboring markets pushed U.S. wheat futures higher Friday.

 

Chicago Board of Trade December wheat rose 11 cents to close at US$5.66 1/4 per bushel, up 2 3/4 cents on the week. Kansas City Board of Trade December wheat jumped 9 1/2 cents to US$5.97 1/2, down 7 1/2 cents on the week. Minneapolis Grain Exchange December wheat advanced 8 cents to US$6.40 1/4, up 1 cent on the week.

 

Wheat was due for a technical bounce after recent sell-offs, traders said. The markets tumbled with equities and crude oil during the past few weeks amid fears about the economic slowdown.

 

The most supportive factor for CBOT wheat may be that speculative funds are net short, an analyst said. By comparison, funds are net long in CBOT corn and soybeans.

 

"You don't have the fund long (position) that poses a liquidation threat," said Shawn McCambridge, analyst for Prudential Bache.

 

There also were supportive expectations that export business may surface, McCambridge said. The value of U.S. wheat is "pretty good at this level" after recent setbacks, he said.

 

"We haven't see Egypt back in (the market with a tender), even though prices have broken back," McCambridge said. "There's a good chance something like that will develop into the weekend."

 

Egypt's state-owned wheat buyer the General Authority for Supply Commodities, or GASC, is a major buyer on the world market. GASC is known for being price-conscious.

 

Weekly U.S. wheat export sales of 435,600 tonnes were toward the low end of trade estimates, which ranged from 400,000 to 600,000. Importers may have been cautious about purchases amid ideas that prices could get cheaper, analysts said.

 

"There wasn't really a sense of urgency to jump in there and try to aggressively cover additional demand," McCambridge said.

 

Next week, outside and financial markets will continue to be "a distraction" to the grains, an analyst said. However, the economic slowdown should not have a major impact on global wheat demand as wheat is a dietary staple, he said.

 

 

Kansas City Board of Trade

 

Position-squaring ahead of the weekend and strength in other markets boosted KCBT wheat, a floor trader. Along with CBOT corn and soybeans, gains in crude oil and the stock market were supportive, she said.

 

"We had a little bit of short-covering before the weekend," the trader said. "We've had such negative markets all week long. It's sort of refreshing to see some green on the screen."

 

It was supportive that CBOT December corn closed above the psychologically important level of US$4, a KCBT trader said. The contract earlier this week closed below that level for the first time in a year. Corn and wheat are linked as both are used for animal feed.

 

 

Minneapolis Grain Exchange

 

CBOT corn and soybeans helped pull MGE wheat higher. Market activity remained "pretty quiet," a floor trader said.

 

"We were actually kind of a lazy follower, quite honestly," a trader said. "Wheat in general was (a lazy follower) today. Corn and beans helped the wheat along."

 

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