January 11, 2007

 

US Wheat Review on Wednesday: Finishes mostly lower on fund liquidation

 

 

U.S. wheat futures ended mostly lower Wednesday under pressure from continued fund and speculative selling but with some underlying support from position-squaring, analysts said.

 

Chicago Board of Trade March wheat closed 3 1/2 cents down at US$4.49 1/2 a bushel, Kansas City Board of Trade March wheat ended 3/4 cent firmer at US$4.72 1/4, and Minneapolis Grain Exchange March wheat finished 3 1/4 cents lower at US$4.70 1/4.

 

Trading during the day session was choppy and focused largely on the release of key U.S. Department of Agriculture reports at the end of the week, sources said.

 

CBOT March wheat opened mixed after a nearly flat overnight trade but moved to the downside and hit its lowest level since Sept. 28.

 

Spillover strength in the neighboring CBOT corn market, along with position-squaring, helped pull wheat into positive territory later in the session, a floor trader added. Fund selling, however, showed up in wheat and corn at the close and drove prices back to the downside, he said.

 

In CBOT pit trades, JP Morgan bought 1,000 March, and spread 1,000 July-March and 500 March-May. Fimat sold 500 March. Funds sold an estimate 4,000 contracts, a source said.

 

Traders are looking ahead to Friday's release of USDA reports on U.S. winter wheat seedings, ending stocks and quarterly stocks, noted Doug Harper, analyst with Brock Associates. Trading should stay sideways for one more session until the reports come out, he added.

 

"I expect the market to kind of go to a shell for one more session," Harper said. "After the weakness of Monday and Tuesday, most people felt like they were positioned to where they wanted to be before the reports."

 

The average expectation for U.S. winter wheat seeded area for 2007 is 44.2 million acres, according to a Dow Jones Newswires survey of 12 analysts. In 2006, the USDA pegged winter wheat seeded area at 40.575 million acres.

 

The average expectation for U.S. wheat ending stocks for the 2006-07 marketing year is 456 million bushels, according to a survey of 10 analysts. In December, the USDA pegged ending stocks at 438 million bushels.

 

Analysts said they figured farmers had planted more wheat last fall after the increase in wheat futures prices and that slow export sales would spur the USDA to raise carryout. The expectations are bearish for trading, sources noted.

 

The USDA is slated Thursday to release weekly export sales for the week ended Jan. 4. Unless there's a "big surprise" with wheat sales, no major market movements are expected during the day session, Harper added.

 

U.S. wheat sales are expected to total 200,000 metric tonnes to 350,000 tonnes, according to analysts surveyed by Dow Jones Newswires.

 

There were media reports overnight that Iraq had bought 700,000 tonnes of U.S. wheat, although the Iraqi government confirmed Wednesday that it had bought the grain during the last seven months. It said delivery of the purchases was expected by the end of February.

 

Earlier this week head of the Grain Board said Iraq planned to bid for new wheat purchases before the end of the month.

 

In other news, Argentina's wheat exporters have oversold the 2006-07 crop and the country will likely have to import wheat later this year to meet domestic demand, the mill worker's union said in a release Wednesday.

 

With 8.4 million metric tonnes of export declarations already registered with the government, domestic demand of 5.7 million tonnes and 1.5 million tonnes needed for flour exports, 15.6 million tonnes are already spoken for, the union said. With 2006-07 wheat output estimated at 14 million tonnes by UOMA, just 15 million tonnes will be available this year when the 1 million tonnes held over from last year are included.

 

 

Kansas City Board of Trade

 

KCBT wheat futures followed CBOT wheat and corn during most of the day session, a floor source said. There was little interest from the funds, he noted.

 

In pit trades, JP Morgan bought 600 March, while Fimat and Man Financial bought 500 March.

 

Traders are looking ahead to Friday's release of the USDA reports, the source added.

 

 

Minneapolis Grain Exchange

 

MGE saw choppy trading during the day session as prices trailed activity in CBOT wheat and corn, a floor source said. There was some position-evening after recent losses, but overall volume was unimpressive as the market waits for the USDA report, he added.

 

In other news, the Canadian Wheat Board has a significant positive economic impact on Winnipeg and on Canada, according to a report released Wednesday by PricewaterhouseCoopers. The full economic-impact analysis was commissioned by and prepared for the CWB in June 2005, a CWB spokeswoman said.

 

The report comes amid continued uncertainty regarding the CWB's future as the single-desk marketer of western Canadian wheat and barley. The country's minority Conservative government has moved forward with attempts to end the 70-year-old institution's monopoly and create "marketing choice" for farmers.