December 29, 2007

 

US Wheat Review on Friday: Falls limit down at CBOT, Kansas City Board of Trade

 

 

Profit-taking and a technical correction drove nearby Chicago Board of Trade and Kansas City Board of Trade wheat futures limit down Friday, traders and analysts said.

 

CBOT March wheat ended down limit down, 30 cents lower, at US$8.85 per bushel. KCBT March wheat fell 30 cents to US$9.14, and Minneapolis Grain Exchange March wheat closed down 23 3/4 cents at US$10.30.

 

Traders were seen to be taking money off the table going into the end of the month and the end of the year, analysts said.

 

Wheat futures have a bearish technical picture, and a lack of fresh news also put pressure on the markets, traders said. The fundamental storyline for wheat is looking more bearish, as well, with demand slowing and the U.S. Plains are getting more moisture, said Tim Hannagan, analyst for Alaron Trading.

 

Egypt bought 30,000 tonnes of U.S. soft red wheat, 30,000 tonnes of Russian wheat and 200,000 tonnes of Kazakh wheat for delivery Feb. 15 to March 15. However, the amount of U.S. wheat sold was too small to be bullish, a CBOT floor analyst said.

 

The cumulative factors of softer demand and improved weather conditions "has the market trading more bearish to the downside," Hannagan said. "It's just a correction in the market."

 

Weekly U.S. wheat export sales for the week ended Dec. 20 were 419,000 tonnes, according to the U.S. Department of Agriculture. The total sales, including 299,000 tonnes from the old-crop and 120,000 tonnes from the new-crop, were within trade estimates of 200,000 tonnes to 550,000 tonnes.

 

The top buyers of wheat for delivery in 2007-08 included Japan, which took 234,900 tonnes, and Mexico, which bought 59,400 tonnes. Sales of wheat for delivery in 2008-09 were for unknown destinations, the USDA said.

 

There also are expectations that index funds will rebalance their positions shortly after the new year and sell wheat. Funds will have to sell 32,000-36,000 contracts of wheat and soybeans and secure 19,000-21,000 contracts of corn, AgResource Company said Friday.

 

Fund activity will play a big role in determining the direction of the markets in the near term, Hannagan said. Commodity funds sold an estimated 3,000 contracts at the CBOT. Traders are also waiting to find out the USDA's estimate for U.S. winter wheat acreage in its Jan. 11 crop report, a trader said.

 

 

Kansas City Board of Trade

 

KCBT March wheat was the first contract to fall limit down as profit-taking weighed on the market. Trading was thin as the market is in holiday mode, so the losses were accelerated, he said.

 

Forecasts for more precipitation in the U.S. Plains are fundamentally bearish, but the market is more focused on a weak technical picture, the trader said. Fund selling was a feature at KCBT, he said.

 

 

Minneapolis Grain Exchange

 

Volume was thin at the MGE ahead of the New Year, and trading was choppy, a MGE floor trader said. The market mainly followed activity at the CBOT and KCBT, he said.

 

Weekly export sales were within expectations and not considered to be surprisingly bullish.