November 23, 2006

 

US Wheat Review on Wednesday: Ends mostly higher with Egypt support

 

 

U.S. wheat futures ended mostly higher Wednesday with fresh export business from Egypt and some liquidation in neighboring markets helping to boost prices, sources said.

 

December Chicago Board of Trade wheat closed 6 1/2 cents higher at US$4.86 1/4 per bushel, December Kansas City Board of Trade wheat settled 1 3/4 cent lower at US$5.13, and December Minneapolis Grain Exchange wheat ended 1 cent up at US$5.00 1/2.

 

Egypt said Wednesday it had bought 60,000 tonnes of U.S. soft red wheat, along with 120,000 tonnes of French wheat. The purchase was on a free on board basis for shipment Dec. 21-31.

 

Traders who had said U.S. prices were too high to attract new export business saw the sale as a sign the U.S. had priced itself back into the global market, sources said. SRW wheat, which is used to make cakes, pastries and snack foods, is the type traded at CBOT.

 

"I think we have taken Chicago futures down enough to where we are competitive," a source said. "That's good for the market."

 

Russia has sold wheat to Egypt recently, and its absence in the tender led to ideas that Russia may be running low on exportable surplus wheat, sources said. Those ideas further supported prices, sources said.

 

More U.S. export sales are still needed, however, a CBOT floor trader said.

 

"This is a good start," one trader said about the Egypt sale.

 

There also was liquidation that inspired buying in CBOT wheat, said Roy Huckabay, analyst with the Linn Group. Traders who held long positions in corn and soybeans, for example, were short in wheat, Huckabay said.

 

"There's a lot of liquidation taking place here," Huckabay said. "Chicago wheat is the short leg on every single trade in the country. If you're liquidating a trade, that means you're buying Chicago wheat."

 

Bulls continued to feed on concerns that dry, warm weather is depleting soil moisture in the U.S. Southern Plains, sources said.

 

Drought conditions have deteriorated in Oklahoma, where the amount of land affected by an extreme drought has grown as prolonged dry weather has continued, according to a Drought Monitor report issued Wednesday by the U.S. Department of Agriculture, National Weather Service and National Drought Mitigation Center. Extreme drought conditions in Texas have expanded, as well, the report stated.

 

In the eastern Midwest, drier conditions will reduce stress on wheat caused by cool, wet conditions, the DTN Meteorlogix weather firm said.

 

In China, rain will ease dry conditions in the south, but key wheat areas in the north are still lacking moisture important for the newly planted crop, the firm.

 

The CBOT will be closed Thursday in observance of Thanksgiving.

 

On Friday, the U.S. Department of Agriculture is scheduled to release the weekly export sales report for the week ended Nov. 16. Analysts estimate weekly wheat export sales between 300,000 and 500,000 tonnes. Sales for the week ended Nov. 9 totaled 329,100 tonnes.

 

On Friday the CBOT will be closing at 1:00 p.m. EST.