November 16, 2006

 

US Wheat Review on Wednesday: Mixed close following late break in corn

 

 

U.S. wheat futures ended mixed Wednesday after spillover strength from corn carried prices sharply higher during the day session, sources said.

 

Chicago Board of Trade corn trimmed gains in late dealings and CBOT December wheat followed it to the downside, analysts said.

 

December CBOT wheat settled 5 cents lower at US$4.81 1/2 per bushel, December Kansas City Board of Trade wheat ended 3 cents up at US$5.21 3/4, and December Minneapolis Grain Exchange wheat closed 1/2 cent higher at US$4.99 1/2.

 

"The corn market is just kind of calling the shots right now," said Doug Harper, an analyst with Brock Associates.

 

CBOT corn ended firmer but off early highs on profit-taking stemming from the inability of nearby months to take out recently established new contract highs, sources said.

 

Wheat has a weaker bias to it but is following corn's direction, an analyst said. If corn is flat, for example, wheat will move slightly to the downside, he said.

 

"Wheat is the weakest link in the grains," the analyst said.

 

In CBOT pit trades, Citigroup bought 800 March, UBS bought 500 March and ABN Amro bought 500 Dec. Fimat sold 500 March. Fortis spread 1,500 March/Dec.

 

Funds bought 3,000, and there was activity rolling out the December/March spread, CBOT floor sources said.

 

There was little fresh fundamental news out to feed bulls, and export sales are considered to be slow, sources said. There are ideas that prices need to go down to attract new business, sources said.

 

"They're very routine, very mediocre," Harper said about export sales.

 

U.S. farmers have planted 4% to 15% more acres of hard red winter wheat this year over last year hoping to cash in on high prices, agronomists said. Kansas, the country's top wheat-producing state, likely has 10%-15% more acres of HRW wheat in the ground this year, while Oklahoma and Texas each planted about 5% more acres than last year, agronomists said. HRW is used to make bread.

 

The expected increase in planting acres is bearish, a CBOT floor source said.

 

"We're trading on a shortage now," he said. "Next year could be the opposite."

 

Weather conditions in the Midwest and Southern Plains are worth watching, but aren't moving the market right now, the trader said.

 

In Ohio, forecasts for heavy rains could pose problems for winter wheat seeding, he said. Repeated dry and windy weather in the Southern Plains is taking a toll on soil moisture and stressing winter wheat, DTN Meteorlogix added.

 

"We're watching the weather but it's too early to see it affect prices," the trader said.

 

 

Kansas City Board of Trade

 

Prominent activity during the day session focused on traders rolling out the December/March spread, a KCBT floor source said. Volume was "thin and choppy" at midsession before KCBT December wheat followed CBOT corn in trimming gains in late dealings, she said.

 

"We definitely saw the downside here coming on the close because corn was losing steam," she said.

 

There was some fund activity following commercial business Tuesday, the source said.

 

Buyers are waiting for new export news to materialize, she said.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures trailed CBOT corn prices throughout the day session, sources said.

 

"We were following along with Chicago," a MGE floor source said. "I think we were a step behind for most of the day."

 

Funds were rolling long positions from December to March contracts, and commercials bought December and sold March, the source said. There was notable spread trade amid overall moderate volume, he said.

 

The source noted there was a lack of fresh fundamental news.

 

"Without a story right now, without extra inputs into the market, we're just chopping around in kind of a two-sided trade," he said.