December 24, 2008


US Wheat Review on Tuesday: Extends rally despite disappointing exports



A rally in the corn and soybean pits buoyed U.S. wheat futures, which managed to spring off the day's lows to log late-session gains Tuesday.


The Chicago Board of Trade March wheat added 6 1/4 cents to close at US$5.75 1/4 per bushel. The contract traded in a 27 1/2-cent range, topping at US$5.80 1/2. Kansas City Board of Trade March wheat added 4 3/4 cents to US$5.94, and Minneapolis Grain Exchange March wheat rose 1 1/4 cents to close at US$6.34 1/4.


Speculative funds bought an estimated 1,000 contracts, according to post-close estimates.


U.S. wheat at all three exchanges slipped about 10 cents on the opening, following losses overnight and a Tuesday morning announcement that Egypt bought 100,000 metric tonnes of Russian wheat in a tender.


The wheat was purchased from Abu Dongol at the price of US$173 a tonne, on a free-on-board basis, and US$8/tonne for freight, Nomani Nomani, undersecretary of the vice chairman of the General Authority for Supply Commodities, told Dow Jones Newswires.


But "the trend is up as (CBOT wheat) is moving up on moving averages," a CBOT floor trader said.


The recent wheat rally is "more technical in nature," but the trader added, it would need some help to take out last week's highs.


Although winterkill threats have subsided, flooding appears to be the next possible weather pressure on the crop.


"A combination of frozen topsoil, previous precipitation, upcoming 1-3 inch five-day water equivalent precipitation amounts and rapid snow melt for 36 hours around Friday leaves us concerned that flooding is probable for some soft red winter wheat," said Mike Tannua of T-Storm Weather.


Tannura warned of localized flooding across wheat in Illinois, Indiana and down the Ohio and Mississippi River Valleys into northern Arkansas.



Kansas City Board of Trade


The realization that Russia sold 100,000 tonnes of wheat for about US$30 cheaper per tonne than U.S. bids pressured the hard red winter wheat along with the neighboring markets Tuesday morning, a KCBT floor trader said.


But, he added, "We've got (speculative) buying for whatever reasons."


With the day's light volume, the buying had an unfettered ability to push the rally, the trader said.



Minneapolis Grain Exchange


Hard red spring wheat was not as responsive as the other markets, but still found strength at the day's end.


"There was light volume in everything," an MGE trader said. "If it hadn't been for corn and beans, I don't think wheat would have either."


The spread between corn and wheat has narrowed up so it doesn't take much for wheat to move in step with corn on the basis of feed interest, the trader added.


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