January 17, 2007

 

US Wheat Review on Tuesday: Finishes lower following CBOT corn

 

 

U.S. wheat futures ended weaker Tuesday with flimsy support from the neighboring corn market and pressure from bearish fundamental factors, sources said.

 

Chicago Board of Trade March wheat ended 15 1/2 cents lower at US$4.64 a bushel, Kansas City Board of Trade March wheat closed 13 1/4 cents lower at US$4.92, and Minneapolis Grain Exchange March wheat finished down 15 1/2 cents at US$4.91 1/2.

 

CBOT corn is considered the leader of wheat, and a rally in corn Friday also carried some wheat futures contracts 30 cents higher, or limit up, sources noted.

 

On Tuesday, however, CBOT March corn opened limit up, or 20 cents higher, and then trimmed gains by more than 13 cents. Corn's move off its high allowed sellers to push wheat to the downside, a CBOT floor trader said.

 

"Wheat had no reason to be up, other than corn," he said.

 

Fundamentally, lower-than-expected export sales continue to be disappointing, and winter wheat seedings are up from a year ago, analysts added.

 

The U.S. Department of Agriculture reported U.S. wheat export inspections for the week ended Jan. 11 totaled 15,880 metric tonnes, within analysts' estimates of 14,000 to 20,000 tonnes. The inspections were lower than the 16,711 tonnes inspected a week earlier, the USDA said.

 

For the marketing year to date, 517,655 tonnes of wheat have been inspected for export, down from 633,171 last marketing year, according to the USDA.

 

With export sales in mind, a source noted that wheat's rally Friday was seen by some as negative because it made U.S. wheat even less desirable in the world market.

 

On the production side, the USDA estimated last week that all 2006-07 winter wheat seedings were 44.089 million acres, up from 2006 seedings of 40.575 million acres. Still, the latest estimate was slightly under the average analyst expectation of 44.2 million acres.

 

In CBOT pit trades, Man Financial bought 2,000 March, and Prudential bought 300 March. ADM bought 1,200 December, and JP Morgan bought 500 December.

 

JP Morgan spread 1,000 March-December, while Man Financial spread 1,000 December-March.

 

Long liquidation also pressured wheat futures prices during the day session. Funds sold an estimated 2,000 contracts, a floor source said.

 

Index funds were net long 198,906 combined wheat futures and options contracts at CBOT for the week ended Jan. 9, the Commodity Futures Trading Commission reported.

 

Index traders cut long positions by 609 contracts and increased short positions by 1,591 contracts, according to the CFTC. Their long positions represented 39.7% of open interest at CBOT, down from 41% a week earlier, the CFTC said.

 

 

Kansas City Board of Trade

 

KCBT wheat futures followed CBOT wheat to the downside and felt weakness from CBOT corn, a floor source said. Wheat was due to retreat after Friday's gains, he added.

 

The size of the decline, however, was somewhat of a surprise because corn did end in positive territory, the source noted.

 

Index funds still have "some good length" at KCBT, he said.

 

The CFTC reported index funds were net long 28,145 wheat futures and options contracts. They decreased long positions 1,225 and increased shorts 593.

 

Weather conditions, meanwhile, remain favorable for winter wheat growth and bearish for futures prices, sources said.

 

Despite a round of cold, wintry weather during the weekend, winter wheat in the Plains is not at risk for damage, the DTN Meteorlogix weather firm reported. Wheat in the Plains is protected from the Arctic-origin cold by existing snow cover, bolstered by up to four inches of additional snowfall from the storms of the past weekend, Meteorlogix said.

 

During the next 10 days, a more moderate weather pattern will spread across the central U.S. as temperatures return to normal and below-normal values in the western Plains and the Midwest, the firm noted. The southeastern Plains should have normal to above-normal temperatures, Meteorlogix said.

 

 

Minneapolis Grain Exchange

 

CBOT corn was the leader during the day session, a MGE floor source said.

 

Another feature was heavy, inter-market trading of the March-March spread between Kansas City and Chicago, he noted. Back-month inter-market spreading was less popular, he noted.

 

In pit trades, UBS bought 400 or 500 March, the source added.

 

"That's really the only support we had all day," he said.

 

The CFTC does not report index fund commitments at MGE, although it said large speculative traders were net long 8,908 wheat futures and options contracts. They decreased longs by 3,193 contracts and increased short positions by 443 contracts.