ANALYSIS-US grain markets to stay robust despite CFTC curb

* No panic grain selling despite CFTC move on funds

* CME stock price and wheat price hold firm

* Little impact expected on fund investment

CHICAGO, Aug 20 - Business at the Chicago Board of Trade is expected to remain robust even though U.S. grain markets are bracing for further government curbs on speculative position limits after a surprise move against two companies on Wednesday.

Fears that a crackdown on speculators could drive some of the CBOT's futures trade overseas may be overstated as no market can match the Chicago exchange's stature as the world's largest grain mart and the global trendsetter for corn, soy and wheat prices.

The CFTC on Wednesday withdrew so-called no-action letters that exempted Deutsche Bank AG's DB Commodity Index Tracking Master Fund and Gresham Investment Management from speculative positions limits for wheat, corn and soy futures.

"The bottom line is the CFTC is making people well aware they should follow the guidelines," said Joe Victor, analyst for Allendale Inc. "They lobbed a big volley across the bow and said to abide by the rules."

"The CFTC has sent a clear signal, and we are going to see more of it," said Don Roose, an analyst with US Commodities.

"It would be hard to discriminate (by acting against one company and not against another). They have to standardize this, or people will be saying foul," he said, adding that traders were cautiously anticipating the CFTC's next steps.

Chicago Board of Trade (CBOT) wheat futures prices fell after the CFTC released its statement, but the market quickly recovered and posted small gains on Thursday.

"Over the long run, we don't see prices of beans, corn and wheat declining," said Terry Reilly, analyst for Citigroup.

"There are other things going on. It's not that much of a market factor in our opinion since much of it is already worked into the trade," he said.

Additionally, "CME stock isn't tanking so that tells you that no one is terribly worried," a trader said.

CME Group Inc is the parent company of CBOT, the world's largest grain futures exchange whose quotes are viewed as the benchmark for global wheat, corn and soybean prices.

CME shares were up 1.15 percent at $271.60 in late Thursday trading.

'SLIGHTLY NERVOUS'

The CFTC began taking steps to curb regulated commodity markets and increase transparency after prices ran up to record highs last year, a move blamed largely on speculators.

The chief targets are index funds, who account for nearly half of the open interest, or active contracts, in CBOT wheat and own roughly 30 percent each in corn and soy.

"There's reason to be at least slightly nervous, even if it appears there was a whisper in someone's ear to quietly get out over the last couple of weeks," Fortis Clearing Americas analyst Charlie Sernatinger wrote in a market letter.

Yet traders do not think the CFTC will take measures that could sharply cut into volume or liquidity, suggesting that funds will continue to be involved in the grain markets.

"I think they'll (funds) convert those accounts into some kind of individual accounts; they'll find some way to keep their positions intact," said Joe Bedore, CBOT floor manager for trade house FC Stone.

CFTC MOVE LAUDED

The American Feed Industry Association applauded the CFTC decision, saying certain types of highly speculative trades were a significant factor leading to dramatic price increases in commodities such as corn, soybeans and wheat in early 2008.

Commercial firms have been complaining about the lack of convergence between prices for CBOT wheat futures and wheat in the cash markets during the delivery period.

This lack of convergence in prices has been blamed on investment funds and on the structure of the CBOT wheat futures contract itself.

However, "I have charts showing no correlation between index fund buying of wheat and wheat prices," Victor said.

An Allendale Inc research graphic based on CFTC data showed index fund long holdings in Chicago wheat at roughly 200,000 contracts when wheat futures were trading around $5 per bushel in 2007. The index fund holdings were only about 180,000 contracts when CBOT wheat reached a record high of over $13 per bushel in early March 2008.

"This contract (CBOT wheat) is a speculative contract and there won't be convergence until we have a shortage of soft red winter wheat. Right now there is a surplus of wheat and that's pressuring the cash basis," a veteran wheat trader said.

CBOT wheat futures for September delivery were up 3 cents at $4.69 per bushel on Thursday.