December 13, 2008

 

US Wheat Review on Friday: Wheat jumps on informa's corn surprise

 

 

U.S. wheat futures closed higher after receiving a boost from corn's increases following a supportive planting estimate released Friday.

 

The Chicago Board of Trade March wheat contract jumped 5 1/2 cents to close at US$5.13 per bushel, off the day's low of US$4.90. The Kansas City Board of Trade's March wheat added 4 1/2 cents to hit US$5.38 1/4, after trading as low as US$5.19. Minneapolis Grain Exchange March wheat gained 1 1/2 cents to US$5.90.

 

December wheat contracts came off the board Friday. CBOT closed up 15 1/2 cents to US$5.06 3/4. KCBOT added 8 3/4 cents to US$5.30 1/4, and MGE lost 20 1/4 to settle at US$6.04 per bushel.

 

Estimates of speculative fund purchases of CBOT wheat contracts ranged between 3,000 at midday to closer to 1,000.

 

Fund activity was "up and down all day," a CBOT floor trader said.

 

Corn extended its "long-overdue rally" following Informa Economics' Friday prediction of a 3.6 million acre year-over-year drop in corn planting, which "re-ignited short-covering buying in the wheat pit," says John Kleist, an analyst-broker at Allendale. Wheat took out the US$5.04 1/2 cent uptrend line and hit a "stop magnet" when it crossed the 10-day moving average, Kleist said. He added wheat faces a "curious gathering" of the moderate-term downtrend line intersecting with the 45-and-50 day moving averages at the US$5.47 1/2 - US$5.56 range.

 

"If the rally wants to continue, it will have to contend with that resistance," he says, noting wheat will "do well to stay around either side of US$5."

 

 

Kansas City Board of Trade

 

A "small threat for winterkill exists" for hard red winter wheat early next week in the north-central Plains states, said meteorologist Mike Tannura, president of T-Storm Weather.

 

Without any snow cover, the wheat will experience 50-60 degree Fahrenheit maximums, only to have temperatures drop to around 0 degrees on Monday and Tuesday morning, Tannura said.

 

In South Australia, Victoria and New South Wales, a three-quarter-inch rainfall was "problematic for unharvested wheat," he added. But, he said, "rainfall is ending across wettest areas of Australia with cool and dry weather to follow for at least 5 days."

 

 

Minneapolis Grain Exchange

 

"The Informa numbers shocked everyone," an MGE floor trader said, noting the report inspired a rally across the grains.

 

"We seem to be at a bottom, at least for the near term," he said.

 

The U.S. Department of Agriculture's Thursday crop report was bearish for corn and wheat, but "we've rallied off it."