January 5, 2006

 

US Wheat Review on Wednesday: Ends mixed; CBOT firms late on fund buying

 

 

U.S. wheat futures ended mixed Wednesday, with Chicago Board of Trade and Kansas City Board of Trade wheat futures recovering from early losses on late speculative buying, brokers said.

 

"Funds bought about 4,000 CBOT wheat, and I think open interest will be up again tomorrow," one broker said, adding that he thought long-only index fund buying was underway.

 

Buying early this year by commodity index funds, which buy and hold commodities similar to indexes that buy and hold stocks or bonds, was expected to echo last year's purchases that produced a mid-winter U.S. grains rally.

 

The long-only funds, such as the Dow Jones AIG Commodity Index that gained 17.5% during 2005, posted their fourth year of gains in 2005 despite rising U.S. interest rates and a stronger dollar.

 

Commodity index fund managers currently have about US$70 billion to invest, up from US$10 billion just five years ago, analysts say.

 

Overnight U.S. wheat export sales were quiet, while spot cash U.S. hard wheat basis bids weakened and soft red basis was steady to firm, cash sources said.

 

Gains were limited at the CBOT amid bearish outlooks for the Jan. 12 U.S. Department of Agriculture winter wheat plantings, quarterly stocks and final 2005-06 production reports.

 

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

 

Commodity funds sold about 1,600 CBOT wheat by about 1:30 p.m. EST, but good buying during the last 45 minutes of the session led to a net addition by funds of about 4,000 lots, one CBOT broker noted.

 

Fimat bought 1,500 March late after selling 1,000 March early and bought 3,000 May US$4.00 call options. Citigroup bought 1,100 March, R.J. O'Brien and Rand Financial each bought about 500 March, and Deutsche Banc bought 800 December early, cash sources said.

 

 

Kansas City Board of Trade

 

KCBT March wheat settled Wednesday steady at US$3.90 1/2 per bushel after matching Tuesday its contract high of US$3.94. May ended up 1/4 cent at at US$3.86 1/4.

 

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

 

ADM Investor Services bought 400 March and sold 200 December; Frontier sold 400 March; and Fimat sold 200 March and bought 200 May, 100 July and 200 December, brokers said.

 

Man Financial bought 300 May and 100 July while Prudential Financial sold 300 March and 100 July and Refco Inc. bought 300 July and sold 350 December.

 

Goldenberg Hehmeyer spread 150 March/May; Fimat spread 600 March/July; and ADM spread 700 July/March, they noted.

 

Crop concerns amid extremely dry conditions across the southern U.S. Great Plains underpinned deferred contracts.

 

Several key U.S. winter wheat growing states issued crop condition reports late Tuesday. Top grower Kansas rated its wheat crop 61% in good to excellent shape versus 63% in late November; Montana reported 61% in that shape versus 50%; Nebraska reported 64% versus 64%; Oklahoma reported only 21% versus 41%; South Dakota reported 37% versus 48%; Illinois reported 77% versus 86%; and North Carolina reported 58% versus 55%. There was no report from Texas, analysts say.

 

The average Jan. 1, 2006, winter wheat condition rating for Kansas, Montana, Nebraska, Oklahoma, South Dakota and Illinois, states for which there is Jan. 1 data annually back to 2001, was 52% good to excellent, says A.G. Edwards & Sons grain analyst Bill Nelson.

 

These six states represented 57% of winter wheat acreage in 2005, he said.

 

While the 52% figure is less than last year's 67%, it tops any of the years of 2001 to 2004, when the rating was 50%. Among these six states, the ratings for Illinois, Kansas, Montana and Nebraska are above the five-year averages. Oklahoma and South Dakota are below the five-year average.

 

 

Minneapolis Grain Exchange

 

MGE March closed Wednesday down 1 1/4 cents at US$3.95 1/4 after matching Tuesday its contract high of US$3.99. May wheat settled down 1 1/2 cents at US$3.94 1/2.

 

Cash U.S. spring wheat basis bids were steady to weak Wednesday, sources said.

 

Minneapolis rail receipts of wheat on Wednesday totaled 86 cars, well below last year's 235 cars. Durum receipts totaled 35 cars, above last year's 25 cars.