Soft red winter wheat futures at the Chicago Board of Trade closed narrowly mixed on Friday as the market took a breather after a strong rally this week lifted prices to 11-year highs, traders said.
Bull-spreading supported nearby months early in the day. But prices stayed below the contract and 11-year highs established on Thursday. The wheat market hit contract highs in each of the previous four sessions, supported by tightening global supplies.
July wheat settled unchanged at $6.06-1/2 per bushel, below Thursday's contract high of $6.19-1/4. Still, the contract finished up 79 cents, or 15 percent, on the week.
Deferred months were up 1/2 to down 4 cents on Friday, with September down 1-3/4 at $6.20-3/4 and December up 1/2 at $6.22. Funds were net even on the day, after building their net long position during the week. After the close, the Commodity Futures Trading Commission's supplemental report showed large speculators (excluding index funds) widened their net long in CBOT wheat to 13,123 contracts as of June 12, up roughly 3,200 from the previous week.
Concerns about disruptions to the US hard red winter wheat harvest continued to underpin the market. Heavy rains moved through parts of the southern US Plains on Thursday, adding to delays in Oklahoma and Texas. "Texas and Oklahoma are exceptionally wet. It's very poor in these areas - wet conditions, disease, quality, inability to harvest, lodging," DTN Meteorlogix forecaster Mike Palmerino said.
However, the market was also technically overbought after the strong rally this week. The nine-day relative strength index for the July contract held steady at 88. Traders consider an RSI of 70 or higher as an overbought signal.
US wheat futures have surged since Monday, when the US Department of Agriculture projected that global wheat stocks would drop to 112.03 million tonnes by the end of 2007/08, the lowest level since 1977/78. Drought in eastern Europe has been a key factor. The small world stockpile means there is little room for further production shortfalls.
On a bearish note, the CBOT said it would raise the initial margin to trade wheat to $1,688, from $1,553 previously, effective with the Sunday night electronic session.
In export news, Egypt cancelled a tender for 55,000 to 60,000 tonnes of wheat due to high prices. The market had little reaction to a bearish spring wheat plantings estimate from consulting firm Informa Economics.