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Wheat settles higher on GMO story reversal

05/31/2013 @ 3:00pm

U.S. wheat futures settled at three-week highs Friday, reversing early losses as end-of-the-month positioning overshadowed the reaction of some of the biggest U.S. wheat buyers to the discovery of a genetically modified strain in Oregon.

July wheat futures ended up 6 3/4 cents, or 1%, at $7.05 1/2 a bushel at the Chicago Board of Trade, the highest settlement since May 9. Kansas City Board of Trade July wheat climbed 5 cents, or 0.7%, to $7.51 a bushel. MGEX July wheat finished up 4 1/2 cents, or 0.6%, at $8.20 a bushel.

The wheat market played catch up with gains in corn and soybeans, recovering from initial losses after South Korea flour mills postponed plans to buy U.S. wheat, a day after Japan banned imports of Western White wheat from the U.S., the type grown in Oregon.

"The markets have a tendency to short first and ask questions later," said Jason Britt, president of brokerage Central States Commodities in Kansas City, Mo. "It's a blip on the radar...you don't want to discount it, but it's fairly contained at this point."

Traders were content to await an official announcement from the U.S. Department of Agriculture's investigation on the issue before assuming the worst, analysts said.

"Traders were not willing to dismiss the situation that caused the Asian country's ban on imports of U.S. white wheat, but were willing to give the USDA the benefit of the doubt that they will get to the bottom of it," said Dan Manternach, analyst with Doane Advisory Services in St. Louis.

Traders are viewing it as an isolated incident until the USDA proves otherwise, Mr. Manternach said.

Futures initially declined amid continued anxiety about export demand as Asian nations put off purchases due to the discovery of a genetically modified strain of wheat at an Oregon farm.

Japan banned Thursday the imports of U.S. Western White wheat, a type grown in Oregon, after the U.S. Department of Agriculture said it was investigating the discovery of the herbicide-resistant wheat strain.

"Traders feel the USDA and wheat growers and export associations will get the situation sorted out and nailed down," said Rich Feltes, director of research at brokerage RJ O'Brien in Chicago.

The industry understands that increased competition from cheaper sources of wheat like Russia and the Ukraine won't allow this situation to be drawn out, Mr. Feltes said. The trade is looking for a quick resolution to the issue and were unwilling to make aggressive bets on the issue until the USDA provides some clarity on the situation, he added.

Meanwhile, wheat drew support from strong gains in corn and soybean futures, with traders that placed prior bets on prices declining taking some profits to the bank to end the month and quarter, analysts said.

Corn and soybean futures sustained price strength throughout the day, supported by uncertainty surrounding eventual crop acreage and solid demand for tight physical stockpiles of corn and soybeans.

Chicago Board of Trade corn for July delivery, the most actively traded contract, finished up 7 3/4 cents, or 1.2%, at $6.62 a bushel. The December contract settled up 4 1/2 cents, or 0.8%, to $5.67 1/4.

CBOT soybeans for July delivery, the most actively traded contract, finished up 14 1/4 cents, or 1%, at $15.10. The November soybean contract settled up 15 cents, or 1.2%, to $13.04 1/4.


Write to Andrew Johnson Jr. at andrew.johnsonjr@dowjones.com.
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
May 31, 2013 15:49 ET (19:49 GMT)
DJ Wheat Futures Reverse Early Losses, Settle at 3-Week High->copyright


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