November 14, 2008


US Wheat Review on Thursday: Ends mostly up on spillover, outside markets



Short-covering and spillover strength from other markets pushed U.S. wheat futures mostly higher Thursday.


Chicago Board of Trade December wheat closed up 5 1/4 cents at US$5.38 1/4 per bushel. Kansas City Board of Trade December wheat ended up 2 1/2 cents at 5.78, and Minneapolis Grain Exchange December wheat finished down 6 1/4 cents at US$6.46 1/4.


Traders continued to watch activity in neighboring and outside markets for direction. Corn, crude oil and stocks were higher near the close of the grains session, but weakness in the markets had pressured wheat around midday.


CBOT December wheat traded in a 39-cent range and closed well off its high of US$5.62. However, the contract ended above its 20-day moving average of about US$5.37 1/4.


"It seems to be nothing more than short covering," Tom Leffler, owner of Leffler Commodities, said about wheats gains.


Speculative funds likely were covering their short, or sold, positions, Leffler said. Trend-following funds significantly reduced their net short position in CBOT wheat in the week ended Nov. 4, according to the Commodity Futures Trading Commission.


"I think were seeing some more of that take place," Leffler said.


There are ideas CBOT December wheat has solid support around US$5. However, willing sellers are seen entering the market above US$5.50, said Jason Britt, president of Central State Commodities.


There was a lack of fresh news for the markets to consider. The U.S. Department of Agriculture will issue its weekly export sales report at 8:30 a.m. EST Friday. Wheat export sales for the week ended Nov. 6 are expected to be 200,000 to 400,000 tonnes.



Kansas City Board of Trade


KCBT wheat took direction from outside influences, such as stocks and crude oil, and from CBOT wheat, a floor trader said. Volume was on the light side, he said.


"Its all oil and outside markets," the trader said. "I know its old news, but thats basically it."


Wheat closed well off session highs for the second consecutive day. KCBT December wheat hit a session high of US$6.06.


"The buyers quit buying and then it kind of drifts back down to a level," the trader said. "The markets kind of tired and nervous. Were just kind of like a boat on the ocean"



Minneapolis Grain Exchange


MGE December wheat closed lower, bucking the firmer trend in wheat. There was spreading on the screen, with traders buying deferred months and selling the nearby December contract, a floor trader said.


The December/March spread, which has been inverted, came back in line, a MGE trader said. December has been trading at a premium to March, but March closed up 4 cents at US$6.48.


"That spread has been inflated, in my opinion, artificially for a long time," the MGE trader said. "Weve got lots of grain around, lots of grain in store. Theres just no reason for it to have an inverse there. I think its just bringing it back into where it should be."


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