December 31, 2008


US Wheat Review on Tuesday: Jumps on light position-squaring



U.S. wheat futures jumped Tuesday on position-evening as the markets recovered from losses Monday in thin, choppy activity.


Chicago Board of Trade March wheat closed up 12 3/4 cents at US$6.04 3/4 a bushel. Kansas City Board of Trade March wheat rose 10 3/4 cents to US$6.21 3/4, and Minneapolis Grain Exchange March wheat climbed 10 3/4 cents to US$6.55 1/2.


Volume was light as the markets remained in holiday mode ahead of the end of the year, traders said. The CBOT, KCBT and MGE will be closed Thursday for New Year's Day.


"We're doing position-squaring," said Jason Britt, president of Central State Commodities. "Either guys have made some money and they really don't want to see it get away... or they've lost money and they've shut down. It's been a violent year for both the bulls and the bears."


U.S. wheat futures have fallen hard since climbing to record highs in February on tight global supplies. Expanded world production and the credit crisis pressured prices downward, with CBOT March wheat falling more than 50% from the February record of US$13 for a nearby contract.


Traders are waiting for some fresh fundamental data from the U.S. Department of Agriculture's winter wheat seedings report, due out Jan. 12. They expect to see a decline in plantings following the drop in prices.


CBOT soybeans and corn ended higher with wheat. Wheat will be keeping an eye on the neighboring markets in the new year and could get spillover support if concerns about dry South American weather boost soybeans, Britt said.


Wheat is "definitely somewhat of a follower," he said. "If the beans would make another leg up because of the drier weather, then wheat's probably going to follow along."



Kansas City Board of Trade


There was light inter-market spreading during the session, with participants buying KCBT wheat and selling CBOT wheat, a trader said. KCBT March wheat closed near its session high of US$6.23 and well above its low of US$6.05.


Dry weather in Argentina is a concern for wheat, along with soybeans, a trader said. Argentina has traditionally been one of the world's top wheat exporters, but drought and reduced plantings hurt production this year.


The Buenos Aires Cereal's Exchange on Tuesday reduced its forecast for Argentina's wheat crop to 9.3 million metric tonnes from 9.7 million tonnes a week ago. Last year, Argentina produced 16.3 million tonnes of wheat, according to the USDA.



Minneapolis Grain Exchange


MGE March wheat gained back its losses from Monday, when the contract closed down 8 1/4 cents. Positioning and strength in other markets were supportive, a trader said.


MGE March wheat closed near its session high of US$6.56 1/4. Its session low was US$6.40 3/4.


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