Wheat Review: Futures End Mixed In Market Correction
CHICAGO (Dow Jones)--U.S. wheat futures ended mostly lower Tuesday in what sources said was a correction to overbought conditions.
December Chicago Board of Trade wheat ended 7 cents higher at $5.01, December Kansas City Board of Trade wheat settled 18 1/2 cents lower at $5.13 1/2, and December Minneapolis Grain Exchange finished 7 3/4 cents lower at $5.02.
CBOT Dec wheat opened sharply firmer, but trimmed gains later in the session.
"The panic and the terror weren't in the market," said one cash-connected CBOT trader.
CBOT, KCBT and MGE hit limit up in several contracts Monday amid global supply concerns and a scramble from shorts to get out of the market. CBOT floor sources said the supply concerns and momentum from Monday's rallies continued to support the market Tuesday.
Chief among the supply concerns was that Australia's parched wheat fields will yield only a fraction of last year's production. Weather forecasts showed no relief to an extended drought there.
One of Australia's biggest wheat growers, meanwhile, said Tuesday he expected national production to be lower than a report issued Monday that predicted yield would drop to 10 million tons this crop year from 25 million tons last crop. Instead, the grower predicted the national harvest to be between 6 million to 8 million tons.
Analysts said some speculators traded CBOT Dec wheat in hopes that the U.S. would win export contracts Australia may not be able to fill.
Still, CBOT floor sources said U.S. fundamentals did not justify the strong price rally.
DTN Meteorlogix said the Southern Plans are receiving rains that are improving soil moisture. Colder weather expected over the next few days shouldn't concern growers, the weather firm said.
"If you look at the U.S. fundamentals, the U.S. is way overdone," the cash-connected trader said. "It's just coming back into more rational behavior."
In other news, Japan on Tuesday issued a routine tender for 60,000 metric tons of wheat in a tender to be concluded Thursday. The tender includes 20,000 tons of hard red winter from the U.S. and 20,000 tons each from Canada and Australia.
In CBOT pit trades, Rand bought 1,200 Dec-March and sold 100 Dec. Calyon bought 200 Dec. JP Morgan sold 600 Dec. Funds bought 500.
Kansas City Board of Trade
KCBT Dec wheat traded down after hitting a new contract high during a spike early in the trading session. The new contract high was $5.40 a bushel, exceeding the previous contract high of $5.39.
Sources said they saw evidence of a "Turnaround Tuesday" to correct prices from Monday's rallies, when KCBT wheat hit limit up in several contracts. Sources added price-taking also occurred.
In other news, KCBT said it was raising the minimum margins for its hard red winter wheat futures contract effective at the close of trading Tuesday. KCBT also will separate spread trades into two categories - intra-crop year spread and old-crop/new-crop spread, the exchange said.
KCBT attributed the changes to increased market volatility.
Minneapolis Grain Exchange
Analysts said MGE followed KCBT into downward trade. One MGE floor source said trading was more cautious after Monday's volatility.
"I think it's just a little bit of a technical setback," he said, describing the day's trading. "Fundamentally, nothing changed. It's still dry in Australia."
The floor source said UBS bought 800 March wheat, and JP Morgan bought 700 Dec wheat. He said Prudential, Country Hedging and ADM sold.
-By Tom Polansek, Dow Jones Newswires; 312-341-5780; [email protected]
