November 4, 2008


US Wheat Review on Monday: Bounces in technical rebound from losses



U.S. wheat futures rose Monday in a technical rebound from sharp losses last month, with short-covering helping to propel prices.


Chicago Board of Trade December wheat jumped 25 3/4 cents to US$5.62 a bushel. Kansas City Board of Trade December wheat climbed 24 3/4 cents to US$5.97 3/4, and Minneapolis Grain Exchange December wheat ended up 17 3/4 cents at US$6.65 1/4.


The markets were in an oversold condition after heavy losses in October and due for a bounce, traders said. Non-commercial speculative funds were net short 38,894 contracts in CBOT wheat as of Oct. 28, according to a supplemental Commodity Futures Trading Commission report.


The rally extended modest gains from last week, when CBOT December wheat ended up 6 3/4 cents on the week. In October, CBOT December wheat lost US$1.43 3/4, or 21%.


"We have seen the spec community so heavily short," said Dave Marshall, an independent broker and analyst. "All of these commodities have been trying to find a season low. October was such a horrible month for virtually any investment."


Wheat has been trying to find support around US$5 and has been running into resistance around US$5.80, Marshall said. CBOT December wheat on Monday hit a session high of US$5.76, below last week's high of US$5.78 1/2.


"We keep kind of churning in this trading range," Marshall said.


Commodity funds bought an estimated 3,000 contracts at the CBOT. It would be surprising if traders did not book some profits Tuesday, Marshall said.



Kansas City Board of Trade


Short-covering supported KCBT wheat, a floor trader said. Market participants didn't want to step in front of the rally ahead of Tuesday's presidential election, the trader said.


Wheat climbed despite more modest moves in the neighboring CBOT corn and soybean markets. CBOT December corn closed up 1 1/2 cents, while November soybeans ended up 3 cents.


"Wheat actually acted independently of corn and beans," the KCBT trader said. However, there wasn't any "significant" business that had to be done ahead of Tuesday, the trader said.


Wheat's direction on Tuesday could be influenced by activity in CBOT corn, the trader said. The markets may struggle if the U.S. Department of Agriculture's weekly crop progress report, due out at 4 p.m. EST, shows better-than-expected progress in the corn harvest, the trader said.



Minneapolis Grain Exchange


MGE wheat finished firmer but "struggled to keep up" with gains at the CBOT and KCBT, a floor trader said. There was talk of some index funds buying at the CBOT and KCBT at the start of the month, he said.


The market lost upside momentum after MGE December wheat was unable to break through last week's high of US$6.76 3/4, a trader said. The contract hit a session high Monday of US$6.75.


"That kind of killed the momentum," he said.


There were no fresh fundamental developments for the wheat markets to feed on, the MGE trader said. Volume was light, and spread trading was subdued, he said.


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