November 5, 2008


US Wheat Review on Tuesday: Jumps on technical buying, spillover



Technical buying and spillover strength from other markets pulled U.S. wheat futures higher Tuesday as Americans headed to the poll to pick their next president.


Chicago Board of Trade December wheat closed up 10 1/2 cents at US$5.72 1/2 a bushel. Kansas City Board of Trade December wheat jumped 11 1/4 cents to US$6.09, and Minneapolis Grain Exchange December wheat rose 2 3/4 cents to US$6.68.


Gains in neighboring and outside markets were supportive, as CBOT corn and soybeans rose with crude oil, gold and stocks. Wheat closed off session highs following some late profit-taking, traders said.


Weakness in the U.S. dollar was bullish for commodities in general, analysts said. A softer dollar makes U.S. commodities cheaper to foreign importers.


Wheat was "following everything else," said Tom Leffler, owner of Leffler Commodities. "It's mainly the outside markets once again dictating" the direction.


Election Day optimism helped carry markets higher, said Sid Love, analyst for Kropf & Love Consulting. There are ideas the new U.S. president will help to improve the economy and turn the page on recent turmoil, he said.


Wheat is due to run higher after a sharp sell-off in October linked to fund disinvestment and the credit crisis, analysts said. Commodity funds Tuesday bought an estimated 2,000 contracts at the CBOT. Short covering from speculative funds likely helped boost prices, traders said.


"Everything's got room to recover, I feel," Leffler said.


But Leffler said he told clients that the gains in wheat should be viewed as a selling opportunity. The fundamentals for wheat remain bearish, as the world in 2008-09 is expected to produce a record-breaking crop. The 2009-10 U.S. winter wheat crop also is off to a good start.



Kansas City Board of Trade


Technical buying helped boost KCBT wheat futures, a trader said. There was follow-through buying after KCBT December wheat on Monday closed above its 20-day moving average, he said.


KCBT December wheat needs to top its Oct. 9 high of US$6.53 to break out of its recent trading range, Leffler said. Then, the market needs to show it can hold above that level, he said.


"If we don't see the follow through, we're going to be right back down in that trading range again," he said. "I still think the fundamentals are really tough on us now."



Minneapolis Grain Exchange


MGE December wheat ended in positive territory but closed well off its session high of US$6.82 1/2, which was hit on the screen. Funds are more interested in buying CBOT or KCBT wheat than MGE wheat.


There was a lack of fresh news out, a trader said. Traders were waiting to see the results of the election.


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