Wheat futures on the Chicago Board of Trade closed firm on Friday on short-covering, but a late sell-off took prices off their session highs, traders said. Ideas that wheat was underpriced relative to corn and soybeans offered early support.
"Wheat was oversold and due for a bounce, and with corn and soybeans competing for acreage, that will take away some wheat acres, especially spring wheat," Man Global Research analyst James Barnett said. However, wheat lost more ground to corn as the wheat market came off its highs toward the close, while corn prices stayed firm. The premium for CBoT March wheat over March corn narrowed, settling at a new low of 54 cents.
March wheat closed up 3-1/4 cents at $4.60-1/4 per bushel, above its 200-day moving average of $4.59 but down more than a dime from its session high of $4.70-1/2. May wheat ended up 3-1/4 cents at $4.75-3/4 and new-crop July was up 2-1/2 at $4.83. Funds bought 3,000 contracts, traders said.
Volume was on the heavy side at an estimated 93,446 futures and 16,330 options. Spreading boosted volume as firms continued to roll March positions forward. There was little supportive fundamental news for wheat, and the US Department of Agriculture's February crop reports were market-neutral. The government left its forecast for 2006/07 US wheat ending stocks unchanged at 472 million bushels, as expected.
On the world wheat balance sheet, USDA trimmed world wheat ending stocks to 120.8 million tonnes, from 121.83 million in January. USDA raised world wheat production for 2006/07 to 592.03 million tonnes, up from 590.75 in January. The report raised production in Kazakhstan to 13.5 million tonnes, up 2 million from last month.
There were no major weather threats in the US winter wheat belt, DTN Meteorlogix said. Snowfall in the Midwest earlier this week should protect the region's soft red winter wheat crop from cold temperatures. In world wheat news, Australia's AWB Ltd could export wheat to India this year, despite a small drought-depleted Australian harvest, as crop losses due to hot weather in India raise the prospect it will import wheat for the second year in a row. The Indian government this week cut its wheat output forecast to 72.5 million tonnes, from an earlier estimate of 74 million.
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