January 14, 2006

 

US Wheat Review on Friday: Higher before holiday, led by KCBT wheat

 

 

U.S. wheat futures settled higher Friday, led again by Kansas City Board of Trade hard red winter wheat futures on concerns about higher protein U.S. hard wheat supplies, brokers said.

 

The three U.S. wheat futures exchanges will be closed Monday for Martin Luther King, Jr. Day, while traders noted Friday's late slip in KCBT March could become a factor in Tuesday's early trade.

 

Higher protein wheat, such as HRW wheat and hard red spring wheat, the class traded at the Minneapolis Grain Exchange, are used to make bread.

 

The supply fears escalated this week when key HRW wheat grower Texas reported very poor dry land crop conditions. Analysts estimate dry land wheat comprises about 80% of Texas' wheat acreage.

 

Moreover, the U.S. Department of Agriculture reported Thursday 2006 U.S. HRW wheat plantings totaled only 29.9 million acres, below analysts' estimates and down about 1% from last year's seedings.

 

The acreage drop reflected sharp winter wheat acreage reductions in Northern Plains states, where bullish estimates of a possible reduction in spring wheat plantings are concurrently emerging on news of a 23-cent drop in county loan rates in key hard red spring wheat grower North Dakota.

 

The government uses an average of posted county prices to determine annual county loan rates. Spring wheat PCP's were relatively high in the first two marketing years for the 2005 calculation, but with weaker subsequent markets, the higher PCP's were dropped out of the 2006 formula.

 

Moreover, North Dakota sources noted the recent expansion of pea, sunflower and corn acreage at the expense of wheat - particularly after last year's wheat disease troubles - could predominate this year.

 

CBOT March wheat ended Friday up 1 1/2 cents at $3.34 3/4; while May ended up 1 1/4 cents at $3.45 1/4 per bushel.

 

Commodity funds were net buyers, with index fund buying seen at about 2,000 lots on Friday, brokers said. Fimat bought 800 March late while Calyon Financial and R.J. O'Brien each bought about 300 March, brokers said. Earlier, Citigroup bought 600 March and Rand Financial sold 300 March.

 

Fimat Futures bought 1,400 March $3.10 puts and sold 1,400 March $3.40 calls, brokers said.

 

Midday Gulf spot cash soft red winter wheat basis bids sagged 1 cent Friday and cash interior basis bids were mixed, cash sources said.

 

In global wheat news, the European Union was a net importer of wheat during the first quarter of the 2005/06 marketing year amid drought-reduced harvests, the USDA said.

 

Wheat ending stocks in the two largest U.S. competitor countries, Canada and Australia, are now estimated to be nearly double levels of just three years ago, the USDA said. Both had big crops again (each revised up this month by over 1 million tonnes) on top of large beginning stocks.

 

Argentine farmers had collected 91% of the 2005-06 wheat harvest by Jan. 12, the Agriculture Secretariat reported Friday.

 

The Secretariat didn't provide an estimate for the average national yield this week, though it said the average yield in Buenos Aires Province, which is home to more than half of the nation's planted area, totaled 2.5 tonnes/hectare, up from the average national yield of 2.38 tonnes/hectare reported last week by the Buenos Aires Cereals Exchange.

 

India eased rules on selling wheat in the open market amid tightening stocks states that have surplus stocks of wheat will be asked to shift the grain to states that face a shortage.

 

Prices of wheat in India's open market have jumped in recent weeks on tight supplies and fears of a shortage; however both government and industry officials have denied the need for imports ahead of the spring harvest.

 

In global wheat weather news, Europe's wheat regions were forecast to receive slightly above-normal rains for the next three months, with the exception of the major producing nation of France, according to agricultural forecasters from Earth Satellite's Cropcast Friday.

 

Kansas City Board of Trade

 

KCBT March wheat settled Friday up 1/2 cent at $3.83 1/4 per bushel; while May ended up 2 3/4 cents at $3.84 1/2.

 

General Mills was a noted buyer of March and May, while Benson Quinn sold a net 450 July, Fimat bought 400 July and sold 250 May, Shay Grain bought 250 March and 50 May and UBS bought 200 March, 200 July and 200 December, brokers said.

 

Man Financial spread 200 July/December while UBS spread 100 March/May, they noted.

 

The KCBT March/CBOT March wheat spread settled at 48 1/2 cents, premium KCBT, after earlier topping the Dec. 1 high close of 52, a reflection of the contrast between tight U.S. HRW stocks and ample SRW supplies.

 

Deferred KCBT new-crop futures again found support from mounting U.S. HRW wheat crop concerns as forecasts called for temperatures to reach into the 80s Fahrenheit this weekend in Texas, brokers said.

 

Kansas City cash bids were steady to firm while midday HRW Gulf spot basis bids dropped 2 cents per bushel, cash sources said.

 

Minneapolis Grain Exchange

 

MGE March closed Friday up 3/4 cent at $3.92 and May wheat settled up 1 cent at $3.93 per bushel.

 

Cash U.S. spring wheat basis bids were mixed Friday, down 5 cents to up 15 cents, sources said.

 

"The best demand is on the low vomitoxin wheat from the western region, which are in tight supply," USDA Market News reported Friday.

 

Minneapolis rail receipts of wheat on Friday totaled 147 cars, almost double last year's 76 cars. Durum receipts totaled 44 cars, also twice last year's 23 cars