December 9, 2008


US Wheat Review on Monday: Bounces from losses; outside markets support



U.S. wheat futures on Monday bounced from last week's sharp losses amid support from strong outside markets.


Chicago Board of Trade March wheat climbed 15 cents to US$4.90 1/2 a bushel. Kansas City Board of Trade March wheat jumped 13 3/4 cents to US$5.17, and Minneapolis Grain Exchange March wheat rose 17 cents to US$5.68.


The grains spent the day session "trying to gain back what they lost on Friday," said Chad Henderson, an analyst for Prime Agricultural Consultants. CBOT March wheat on Friday finished the week down 85 3/4 cents on the week.


Last week's losses were overdone, a CBOT floor analyst said. CBOT December wheat was due for a recovery after it closed Friday at the lowest price for a nearby contract since April 2007, he said.


The markets fell "too much down on one day and need to bounce it back," Henderson said. Gains in crude oil and equities helped lift wheat, as the grains continued to look to the outside markets for direction, traders said.


Crude oil is linked to the grains because funds often trade in a basket of commodities and because ethanol is made from corn. A weaker U.S. dollar was seen as supportive because it makes U.S. grains more attractive to foreign buyers.


The size of wheat's rebound this week will depend on activity in outside markets, an analyst said. The holiday season has reduced volume in the grain markets, traders said.



Kansas City Board of Trade


KCBT wheat futures rebounded from last week, a floor trader said. At the close of trading, a fund bought 250 March, and a commercial sold 150 March, he said.


"We didn't have any heavy trade, I'm afraid," the trader said.


A 400,000-tonne reduction in the Buenos Aires Cereals Exchange's estimate for Argentina's crop lent some support, Henderson said. Argentina has traditionally been a major wheat exporter on the world market, although the crop this year has struggled due to drought.


Traders are looking ahead to the release of the U.S. Department of Agriculture's monthly supply-and-demand report on Friday, a KCBT trader said. Market participants should stay on the sidelines ahead of the report, he said.



Minneapolis Grain Exchange


MGE wheat futures fell on lackluster volume, a floor trader said. The March/May spread narrowed to 3/4 cent from 1 3/4 cents on Friday.


May wheat closed up 16 1/4 cents at US$5.69. There are expectations the March/May spread will go inverted, a trader said.


Weekly U.S. wheat export inspections of 12.577 million bushels were "really light," a MGE trader said. The inspections were below trade estimates, which ranged from 14 million to 23 million tonnes.


Producers continue to hold on to their hard red spring wheat in hopes of seeing higher prices, a MGE trader said. They are waiting to see gains of US$2 to US$3, not 20 cents to 30 cents, before selling, he said.


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