November 12, 2008


US Wheat Review on Tuesday: Rallies late on short-covering, pricing



Short-covering and some suspected pricing from end users pulled U.S. wheat futures higher in a late rally Tuesday.


Chicago Board of Trade December wheat rose 3 1/4 cents to US$5.23 1/4 per bushel. Kansas City Board of Trade December wheat climbed 8 cents to US$5.71, and Minneapolis Grain Exchange December wheat closed up 4 1/2 cents at US$6.44 1/2.


Short-covering came into the market after bears were unable to push CBOT December wheat below its overnight low of US$5.05 1/4 a bushel, said Shawn McCambridge, analyst for Prudential Bache. Some bears have been hoping to see the price slip below US$5; the day session low for open outcry trading was US$5.07.


There is a "general perception that we've batted this market down pretty hard," McCambridge said. "When we couldn't achieve the technical objective this morning, some people just didn't want to stay in with their short positions."


Fresh fundamental news was absent from the market. The higher close in wheat and losses in CBOT corn and soybeans were a turnaround from Monday, when the row crops climbed and wheat ended mostly lower.


There was some unwinding of wheat/corn spreads amid chatter that wheat is competing with corn for feed use, a trader said. CBOT December corn closed down 9 1/4 cents at US$3.74 1/4.


There are ideas CBOT December wheat will continue to pivot around US$5 per bushel due to end user demand and easing liquidation from funds, analysts said. Export demand has been lackluster lately, but some traders are looking for the possibility of business starting to develop, they said.


Wheat will continue to find direction from the neighboring corn and soybean markets, traders said. Activity in outside markets like crude oil and equities also remain a factor.


"The [market's] direction will still depend on either what happens in the outside markets or the ability to generate some new business at this price level," McCambridge said.



Kansas City Board of Trade


KCBT wheat led the upside in the late rally. The December contract closed at its session high of US$5.71.


There appeared to be some pricing at the KCBT after recent losses, a floor trader said. The market is "seeing a little bit of stirring out there" from end users, he said.


JP Morgan was noted as buying 750 to 1,000 December contracts at the close, a trader said. The firm spread about 1,000 December-July during the session, he said.



Minneapolis Grain Exchange


MGE December wheat closed at its session high of US$6.44 1/2. The market was a follower of the CBOT and KCBT, a trader said.


MGE wheat has recently been building its premium over CBOT and KCBT wheat, but KCBT wheat was the upside leader Tuesday. Wheat futures were lower for much of the day session before the late rally.


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