January 11, 2006

 

US Wheat Review on Tuesday: Mostly up; index fund buying boosts CBOT

 

 

U.S. wheat futures settled mostly higher Tuesday, with Chicago Board of Trade soft red winter wheat rallying on much-anticipated index fund buying late in the session, a slight technical bounce after recent losses and late gains in CBOT corn futures, brokers said.

 

Commodity index funds, which buy and hold positions, mostly posted double-digit returns in 2005, and traders have been expecting new monies and index reweighings in U.S. wheat futures early this year.

 

Kansas City Board of Trade hard red winter wheat futures ended up after trading higher most of the session as nearby KCBT March found support at its 50-day moving average. Support was also seen from estimates the U.S. Department of Agriculture will report Thursday tighter HRW stocks and only a 3% increase in 2006 U.S. HRW winter wheat seedings.

 

In addition, grain analysts forecast the USDA would report Thursday a 5.6% gain in U.S. winter wheat acres, a 19% gain in U.S. soft red winter wheat acreage, and a 5.2% boost in white wheat plantings.

 

"We probably don't do too much ahead of Thursday's report," one CBOT wheat broker said late Tuesday.

 

CBOT March wheat ended Tuesday up 2 3/4 cents at US$3.29 1/4; while May ended up 2 1/2 cents at US$3.39 1/2 per bushel.

 

Commodity funds were net buyers, led by Fimat's late purchase of 1,500 CBOT March, brokers said. O'Connor and Co. bought about 300 March while Term Commodities sold 400 March US$3.10 put options, they said.

 

In spread trade, Iowa Grain spread 400 May/December, Term Commodities spread 300 December/July, ADM Investor Services spread 200 March/May and Prudential Financial spread 200 March/July.

 

Midday Gulf spot cash soft red winter wheat basis bids were steady Tuesday while cash interior basis bids were steady to mixed, cash sources said.

 

In U.S. wheat export news, Japan sought 61,000 tonnes of U.S. wheat in an overall tender for 146,000 tonnes that will be concluded Thursday.

 

In global wheat news, Morocco is tendering to buy 350,000 metric tonnes of European Union wheat, trade sources said. The tender is taking place within the framework of the Dec. 5, 2003, agreement between Morocco and the E.U., which gives Morocco a tariff-rate quota for wheat, the trader added.

 

Syria postponed a tender to sell 100,000 metric tonnes of Syrian wheat until Jan. 16, and Taiwan bought 30,000 tonnes of Australian wheat.

 

And the managing director of India's state-run Food Corporation said imports were not necessary or expected ahead of the country's harvest in March.

 

The French state grains board, Office National Interprofessionnel des Cereales, or ONIC, on Tuesday estimated 2005-06 French soft wheat output at 35.714 million metric tonnes, just below the December forecast of 35.697 million tonnes, but slightly above the 35.569 million tonnes estimated a year ago.

 

 

Kansas City Board of Trade

 

KCBT March wheat settled Tuesday up 1 1/2 cents at US$3.72 per bushel after sagging right at the close, while May ended up 3 1/4 cents at US$3.72 1/2.

 

The KCBT March/CBOT March wheat spread settled at 42 3/4 cents, premium KCBT, after closing Monday at 44 cents. A technical trader noted key support was at 41 cents, just below the Dec. 13 low of 41 1/2.

 

Frontier Futures sold 200 July, ABN bought 300 March and sold 100 July, FC Stonnee bought 250 March and sold 100 July, Man Financial sold 300 March, Prudential sold 200 July, the Refco division of Man Financial boughgt 200 July and sold 200 March and Shay Grain bought 100 March, brokers said.

 

FC Stonnee spread 700 July/May, Shay Grain spread 250 May/March and 150 May/July and Fimat spread 280 March/July, brokers said.

 

KCBT deliverable HRW wheat stocks as of Jan. 6 fell 105,000 bushels from the previous week's level, while Hutchinson deliverable HRW stock were down 1.666 million bushels.

 

Deferred KCBT new-crop futures found support from lingering crop concerns despite very light overnight rains in the southern Plains, brokers said.

 

Texas on Monday reported its winter wheat crop was 81% in poor to very poor shape with only 3% in good condition amid this year's drought.

 

 

Minneapolis Grain Exchange

 

MGE March closed Tuesday up 2 1/4 cents at US$3.82 3/4 and May wheat settled up 3 1/4 cents at US$3.82 1/2.

 

Cash U.S. spring wheat basis bids were steady Tuesday, sources said.

 

Minneapolis rail receipts of wheat on Tuesday totaled 183 cars, less than last year's 386 cars. Durum receipts totaled 9 cars, more than last year's 3 cars.

 

Meanwhile, total deliverable Minneapolis and Duluth hard red spring stocks as of Jan. 6 were up 39,000 and 612,000 bushels, respectively, from the previous week.