November 15, 2006

 

US Wheat Review on Tuesday: Firmer close on corn, technical strength

 

 

U.S. wheat futures settled sharply higher Tuesday in a reversal from early losses fueled by technical buying in the neighboring corn market, analysts said.

 

December Chicago Board of Trade wheat rose 9 1/2 cents to US$4.86 1/2 per bushel, December Kansas City Board of Trade wheat ended 10 1/4 cents up at US$5.18 3/4, and December Minneapolis Grain Exchange wheat closed 5 cents higher at US$4.99.

 

Corn led wheat prices to the upside, but CBOT and KCBT futures developed their own technical strength later in the day session, said Roy Huckabay, analyst with the Linn Group.

 

KCBT March wheat, for example, traded below its Monday low and above its Monday high, he said. That triggered fund buying, he said.

 

CBOT December wheat closed above Monday's high of US$4.85, and KCBT December wheat ended above Monday's high of US$5.12.

 

"The wheat market was pulled higher by corn but developed its own pizzazz when you developed the technical outside day up," Huckabay said.

 

Wheat futures also saw some support from stronger soybean prices, a CBOT floor source with E Hedger said. There were big inverses in spreads, he said.

 

"I think today's action is just a reaction to the strength in corn and beans," the source said.

 

Fundamentally, there was not much fresh news for bulls to feed on, a CBOT floor trader said. Export sales remain disappointing and slow, he said.

 

Japan said Tuesday it was seeking 125,000 metric tonnes of wheat in a routine tender to be concluded Thursday for shipment Jan. 1-31. Four South Korean flour mills also are jointly seeking 21,500 metric tonnes of U.S. No. 1 wheat in a tender to be concluded Wednesday.

 

"We're not doing any business," the E Hedger source said.

 

Rains in the eastern Corn Belt may cause problems for seeding the winter wheat crop, an analyst said. He noted, however, that it was too early for the weather to have a significant impact on crop production.

 

"We're not seeing any real price direction from the weather," the analyst said.

 

In a supportive development, France forecasted its domestic 2006-07 soft wheat production at 33.4 million metric tonnes, a decrease of 0.06 million tonnes from its October estimate and down 4.1% from the 2005-06 crop.

 

The estimate was 1.2% below the previous five-year average.

 

The Commodity Futures Trading Commission, meanwhile, said in the week ending Nov. 7, funds were net long 37,748 contracts in CBOT wheat. They cut longs by 1,658 and shorts by 1,385.

 

At the KCBT, the CFTC said funds were net long 36,664 contracts. Funds cut shorts 989 and boosted longs by 65 contracts.

 

At the MGE, the CFTC said funds were net long 10,659 contracts after adding both long and short positions. They lifted longs 1,355 and shorts 82.

 

 

Kansas City Board of Trade

 

KCBT wheat futures felt support from the rally in CBOT corn, a floor source said. Activity was relatively light, he said, and most of the action was in the December/March spread trade, he said.

 

"Despite being up 10 1/4 cents, we were pretty slow," the floor source said.

 

Among the big players were Man Financial, which spread 1,000 March/December, and Fimat, which spread 600 December/March and 500 March/December, the source said.

 

 

Minneapolis Grain Exchange

 

There was some December/March spread trade, but MGE wheat mostly followed CBOT corn to the upside, a MGE floor source said. Volume was moderate, he said.

 

"The only reason we were up was the corn market," the source said. "That's kind of been the supporting factor."

 

The source noted the traders were getting out of December positions.