March 8, 2006

 

US Wheat Review on Tuesday: Mixed finish after late soybean break

 

 

U.S. wheat futures closed mixed Tuesday in what was largely a technical move by the funds adding a bit of length in the Chicago market, while slight losses were seen in Kansas City and light gains in Minneapolis.

 

A late break in soybeans allowed selling to pressure the overall wheat market.

 

Basis May contracts, Chicago Board of Trade gained 1 cent to settle at US$3.81, Kansas City Board of Trade lost 3/4 cent to US$4.38 3/4 and Minneapolis Grain Exchange wheat added 1 3/4 cents to US$4.24 3/4.

 

The activity was "more of a technical move," said Shawn McCambridge, senior grains analyst at Prudential Financial in Chicago, along "with underlying fundamental concerns" of showers in the forecast.

 

And with conditions so dry, even the threat of showers is enough to pressure the market, sources said.

 

The U.S. hard red winter wheat crop is suffering from a warmer- and drier-than-normal winter, with parts of the southern Plains seeing drought conditions. Thus, it was no surprise when the U.S. Department of Agriculture reported Monday afternoon that crop ratings in February continued to decline from January levels.

 

To illustrate the severity of the decline in ratings, a full 87% of the Texas crop is rated poor to very poor while Oklahoma's wheat is 70% poor to very poor. Temperatures in the Lone Star state rose to the high 80s and 90s Fahrenheit last week, making conditions even worse. Some wheat was even being baled up for hay.

 

Oklahoma wheat fields received virtually no rain in February.

 

Kansas wheat was stressed by above-normal temperatures and below-normal precipitation, with just 27% of the state's crop in good-to-excellent shape.

 

At the CBOT, Fimat and CIS bought 200 May, ABN Amro bought a net 300 May, Bunge sold 300 May, Calyon Financial bought 400 May and 200 July, Goldenberg Hehmeyer bought a net 400 May, Iowa Grain sold 200 May, Man Financial sold 300 May, R.J. O'Brien bought 400 May, Refco sold 400 May and UBS bought 200 May and sold 100 July.

 

Funds bought an estimated 3,600 wheat contracts on the day, which didn't include the late selling.

 

 

KANSAS CITY BOARD OF TRADE

 

KCBT wheat futures closed steady to weak on ideas the crop could see beneficial rains this week, sources said.

 

However, one broker said traders may be "micromanaging" the short-term weather forecasts, some of which called for better chances of rain and coverage up to 60%-70% in parts of the southern Plains. The best chances of rain look to be in the southern areas, while "rain amounts decrease the further north you get," the KCBT floor broker said.

 

However, with the bulk of the crop ratings in the poor-to-very-poor categories, "we need a good soaker just to stabilize the crop," he said.

 

Fimat bought 300 July, ADM bought 500 July and UBS bought 200 July. Much of the selling was scattered, light amounts. Man sold a net 100 July and ADM sold 200 May.

 

At one point during the session, local traders were long on the crop ratings' decline ahead of the midday weather reports. When some of those reports showed increased rain chances, those longs bailed and attracted selling to the market.

 

 

MINNEAPOLIS GRAIN EXCHANGE

 

MGE wheat closed with mild gains as some traders bought May wheat on the close. Trade was very thin, a broker said.

 

Prudential-Financial bought about 200 May, while Fimat bought 100 July and 200 December. Country Hedging sold 200 May.