March 14, 2007

 

US Wheat Review on Tuesday: Closes lower on corn as funds sell

 

 

U.S. wheat futures finished lower Tuesday as spillover pressure from the neighboring corn market, fund selling and bearish weather conditions weighed on prices, traders and analysts said.

 

Chicago Board of Trade May wheat ended 4 1/4 cents lower at US$4.66 1/2 per bushel. Kansas City Board of Trade May wheat closed down 5 3/4 cents at US$4.91 1/2, and Minneapolis Grain Exchange May wheat settled 4 1/4 cents lower at US$5.06 1/2.

 

Wheat is still looking to the CBOT corn market for direction, and the direction corn gave was lower, a CBOT floor trader said. Recent rains in the U.S. Southern Plains and ideas that the winter wheat crop is in good condition were fundamentally bearish, added Dan Zwicker, senior analyst at AgriVisor Services.

 

"Improving moisture conditions in the Southern Plains is positive for winter wheat prospects and price negative," Zwicker said. "I think you're seeing some of that and spillover pressure from corn."

 

Plains wheat areas on Monday had showers and light rain in the southeastern sector, including southern Oklahoma and northern Texas, DTN Meteorlogix reported. Dry weather is in store through the remainder of the week, and temperatures should be above to much above normal through the balance of the week, the weather firm said.

 

"The combination of warm temperatures and periodic showers that has recently been in effect is beneficial for wheat, now into the jointing stage in Oklahoma and Texas," Meteorlogix said.

 

There was further pressure on wheat from commodity fund selling of an estimated 2,000 contracts, traders said. In CBOT pit trades, Rosenthal bought 600 May, while JP Morgan bought 300 December and ABN Amro sold 300 May.

 

In the near term, wheat futures will likely continue following the lead of CBOT corn, floor traders said. Zwicker said the weather could still turn unfavorable and help to support prices.

 

"We still have some cold weather yet in front of us," he said. "Seasonally, you still have cold snaps that can come in to place in the month of April. There's still probably frost potential out there in wheat."

 

In other news, some CBOT floor traders said they were skeptical about the Indian government's decision not to adjust its wheat output after a bout of damaging, unseasonable rains in the last few days. The agriculture minister said estimated output would remain unchanged at 72.5 million metric tonnes.

 

India's food ministry, meanwhile, has recommended a further hike of INR250-INR750 (US$5.65-US$16.97) a metric tonne in intervention price for wheat in 2007 to enable adequate local government buys and avoid imports, a senior government official said.

 

The intervention or minimum support price at which the government is to purchase wheat from farmers in 2007 has already been increased to INR7,500/tonne from INR7,000/tonne, a year earlier. The local purchases are scheduled to begin April 1 and volumes bought by the government will determine whether India will import wheat this year.

 

 

Kansas City Board of Trade

 

KCBT trading was mostly quiet until activity picked up late in the session, which mirrored action at the CBOT, a floor trader said. Losses in the CBOT corn market and the beneficial moisture for hard red winter wheat in the Plains were negative, he added.

 

In pit trades, JP Morgan bought 800 May and then sold 700 May on the close. Fimat bought 300 July, and Man Financial sold 300 May.

 

 

Minneapolis Grain Exchange

 

CBOT corn continued to be the leader of MGE wheat and dragged prices down, a floor trader said. On the session lows, there was some commercial buying, he noted.

 

The commercials were "pretty much what held us up on our lows," he said.

 

There was some inter-market spreading, with traders selling MGE to CBOT in December and May, he said. Overall volume was "better than it has been for the past week" but still "modest," the trader said.