October 25, 2006

 

US Wheat Review on Tuesday: Stronger on higher corn trading

 

 

U.S. wheat futures closed higher Tuesday on fund buying and spillover interest from strong corn prices, sources said.

 

December Chicago Board of Trade wheat closed up 5 1/2 cents at US$5.22 1/2 per bushel; December Kansas City Board of Trade ended 3 cents higher at US$5.45 1/4; and December Minneapolis Grain Exchange wheat settled 5 cents higher at US$5.23 1/4.

 

CBOT corn set new life-of-contract highs in several months, and a floor source said there was carryover activity in the wheat pit.

 

"Corn is setting the sea level," he said. "Wheat's kind of flopping around."

 

Mike Zuzolo, chief analyst for Risk Management Commodities Inc., noted it seemed as though locals had started trading again after being forced out of the market by violent price shifts earlier this month. He said the locals were liquidating and funds were coming in to buy.

 

Funds bought an estimated 3,000 contacts at CBOT, Zuzolo said.

 

"I think the confidence of the locals is back," he said. "It sounds like they're healing back up again."

 

The CBOT floor source said he thought locals, along with other traders who left the market because of the extreme volatility, had returned "to a limited degree." He said the wheat market is still not nearly as liquid as it was.

 

There was little fresh news to influence wheat trading, sources said, and that probably helped support prices. In the absence of anything new, traders stayed focused on ongoing global supply problems, including a severe Australian drought, said Dan Zwicker, an analyst with AgriVisor.

 

"You're going to have to have negative news to turn the market down," Zwicker said. "If you've just got no news or the same news, the market will continue to focus on those tightening demand tables."

 

CBOT July 2007 wheat closed down 1 cent to US$4.68 1/2, which Zuzolo attributed to weather forecasts that show beneficial rains headed into the U.S. Southern Plains this week.

 

DTN Meteorlogix said some of the Plains' moisture will be enhanced by high-atmosphere influx from Hurricane Paul in western Mexico.

 

Primary wheat areas of Australia and Ukraine are forecast to remain dry.

 

 

Kansas City Board of Trade

 

Strong CBOT prices pulled KCBT prices higher, a KCBT floor source said. The source said trading was quiet and there was some light fund buying.

 

"Light fund buying kind of led everything higher, and ratcheted it up throughout the day," he said.

 

The source said rumors that Iraq may buy more U.S. wheat are in "the back of people's minds."

 

"There's a lack of news," he said. "Lower volume is going to translate to more volatile price action."

 

 

Minneapolis Grain Exchange

 

An MGE floor source said trading was quiet and prices followed the CBOT higher.

 

In other news, the provincial government of Manitoba said it will allow farmers in the province to vote on the future of the Canadian Wheat Board if the federal government refuses to do so. The CWB has a monopoly on wheat marketed in western Canada, but the federal government has promised to create "marketing choice."