January 4, 2006

 

US Wheat Review on Tuesday: Up on fund buying; Kansas City ,Minneapolis Grain Exchange at 2 1/2-mo highs

 

 

U.S. wheat futures ended higher Tuesday on fund buying, with nearby Kansas City Board of Trade and Minneapolis Grain Exchange futures setting 2 1/2- month highs despite disappointing weekly U.S. wheat export inspections, brokers said.

 

Talk that long-only commodity index funds may buy en masse early this year, following heavy buying during February 2005, has rallied U.S. wheat futures for the past month, despite bearish expectations for the Jan. 12 U.S. Department of Agriculture winter wheat plantings, quarterly stocks and final 2005-06 production reports.

 

CBOT March wheat closed Tuesday up 6 3/4 cents at US$3.46, just below last week's 2 1/2-month high of US$3.47. May ended up 6 3/4 cents at US$3.55 1/2 per bushel.

 

Commodity funds were net buyers, led by JP Morgan, Man Financial, ABN Amro and Calyon Financial's purchases of CBOT March, brokers said. Fimat sold 200 March and 300 July while Tenco Inc. and O'Connor were both net sellers of March, they noted.

 

Traders said that the former Cargill Investor Services and Cargill Inc. had begun clearing through JP Morgan at both the CBOT and the Chicago Mercantile Exchange. Prior to the sale of its brokerage business to Refco, Cargill was one of the largest firms involved in the grain and livestock futures markets at the CBOT and CME.

 

Spot cash U.S. soft red winter wheat basis bids were mostly steady Tuesday, cash sources said.

 

Overnight, U.S. wheat export sales were quiet while the USDA reported weekly U.S. wheat export inspections totaled 9.994 million bushels, below expectations of 19 million-24 million and below last week's inspections of 24.834 million bushels.

 

Analysts have recently noted that the recent speculative-led rally in U.S. wheat futures had decreased the competitive pricing of U.S. supplies versus foreign wheat.

 

In global wheat news, India's wheat plantings totaled 24.3 million hectares in the Nov. 1-Jan. 2 period, compared with 24.1 million hectares in the year-earlier period, the ministry of agriculture said Monday.

 

India's wheat plantings are key this year amid tight supplies and the possibility of imports in the near term.

 

U.S. wheat traders speculated in early December that India would need to import before March, but the Indian government has steadfastly denied that rumor.

 

India's wheat output reached a record 76.4 million tonnes in 1999-2000 but has since seen a steady decline. Against a target of 79.5 million tonnes in 2004-05, the country produced only 72 million tonnes.

 

Argentina should harvest 11.6 million metric tonnes of wheat in 2005-06, the Buenos Aires Cereals Exchange forecast Monday.

 

This forecast, based on better-than-expected yields in southeastern Buenos Aires Province, is up from 11.4 million tonnes previously. The USDA, which has forecast the average yield this season at 2.39 tonnes/hectare, sees final Argentine wheat output totaling 12.1 million tonnes.

 

 

Kansas City Board of Trade

 

KCBT March wheat settled up 3 1/2 cents at US$3.90 1/2 per bushel after setting a 2 1/2-month high of US$3.94. May ended up 7 cents at at US$3.86.

 

The KCBT March/CBOT March wheat spread settled at 44 1/2 cents, premium KCBT, after closing Friday at 47 3/4 cents.

 

Man Financial bought 500 July and sold 350 March; Man Financial bought 2,100 March and sold 200 May; ADM Investor Services sold a net 100 March and 300 December; FC Stonnee sold 200 March; and Fimat sold 550 March, brokers said.

 

In spread trade, UBS spread 500 March/July and 500 July/March, while Man Financial and ADM each spread 300 July/March, they said.

 

Spot U.S. cash HRW wheat basis bids were mostly steady to mixed Tuesday, with a 2-cent loss in Portland, Ore., cash sources said.

 

Traders closely tracked reports of U.S. hard red winter wheat crop progress amid lingering reports of grassfires across top producers Oklahoma and Texas due to abnormally dry conditions.

 

 

Minneapolis Grain Exchange

 

MGE March closed Tuesday up 4 1/2 cents at US$3.96 1/2 after setting a 2 1/2-month high of US$3.99. May wheat settled up 6 3/4 cents at US$3.96.

 

Cash U.S. spring wheat basis bids were steady to 25 cents lower Tuesday amid heavy country movement, sources said.

 

Minneapolis rail receipts of wheat on Tuesday totaled 297 cars, well above last year's 97 cars. Durum receipts totaled 133 cars, also well above last year's 41 cars.