March 27, 2007

 

US Wheat Review on Monday: Closes down but bounces from session lows

 

 

U.S. wheat futures on Monday finished lower but off session lows with spillover pressure seen from neighboring markets, traders and analysts said.

 

Chicago Board of Trade May wheat finished 3 1/2 cents lower at US$4.58 per bushel. Kansas City Board of Trade May wheat closed down 7 3/4 cents at US$4.77, and Minneapolis Grain Exchange May wheat ended 2 1/2 cents lower at US$4.99.

 

Trading was mostly quiet until late in the day session when a sell-off in the neighboring CBOT corn and soybeans markets pulled wheat to its session lows, traders said.

 

"It went down with the rest of them," a CBOT floor trader said about wheat futures.

 

Wheat rebounded higher before the close, however, as corn came off its low, the floor trader added.

 

The wheat market was also able to attract some underlying support because it does not have the "heavy preponderant long position" that corn does, noted Dale Durchholz, senior analyst at AgriVisor Services.

 

The Commodity Futures Trading Commission reported Friday that non-commercials raised short CBOT wheat futures and options positions by 11,161 lots and were net short 26,073 in the week ended March 20. Non-commercials cut long positions by 1,577 lots, according to the CFTC.

 

"You already have a short bias by some people, so you don't have as much new selling coming into the (wheat) market at this particular point in time," Durchholz said. "Without that, wheat isn't going to have as much hard selling to the downside."

 

Some unraveling of corn/wheat spread trades also likely contributed to wheat's recovery, Durchholz added.

 

A general lack of follow-through selling provided more underlying strength, a CBOT floor trader said. In CBOT pit trades, JP Morgan bought 400 May, while Fimat sold 200 May. Funds sold an estimated 1,000 contracts.

 

In other news, the U.S. Department of Agriculture reported export inspections for the week ended March 22 totaled 14.384 million bushels, within analysts' expectations that inspections would be in the range of 12 million to 18 million bushels. Export inspections for the marketing year to date were 704.016 million, compared to 820.638 million bushels inspected for export at the same point last marketing year, according to the USDA.

 

The weekly inspections were "nothing there for anybody to get excited about," an analyst noted.

 

Tunisia's state-run Office des Cereales, meanwhile, said it was tendering to buy 90,000 metric tonnes of soft wheat for delivery from April to May, of any origin, on a cost and freight basis. The tender will take place Tuesday, he added.

 

Tunisia last bought wheat Feb. 8 when it purchased 92,000 tonnes of optional origin wheat for shipment early February to early March.

 

In other export news, U.K. wheat exports for January totaled 235,136 metric tonnes, a rise of 38.3% from the 170,055 tonnes exported a month earlier, according to customs figures released Monday through the U.K. Home-Grown Cereals Authority.

 

In the first seven months of the 2006-07 campaign, exports have totaled 1.303 million tonnes, down 11.2% from the same period last year.

 

 

Kansas City Board of Trade

 

KCBT wheat futures stumbled under pressure from favorable weather for the U.S. hard red winter wheat crop and the potential for a high yield, floor traders said.

 

The Southern Plains, particularly the panhandles of Texas and Oklahoma, saw rainfall over the weekend generally ranging between about half an inch up to an inch-and-a-half, according to DTN Meteorlogix. The eastern areas can expect up to an inch more through Tuesday, while the western areas will be drier, with perhaps up to a half inch of rain falling Wednesday or later, the weather firm said.

 

"The weather is deemed as being a little bit negative at this time," an analyst said.

 

In pit trades, ADM sold 400 May, and JP Morgan sold 500 July. Man Financial sold 400 July, and Prudential sold 300 May. Fimat bought 400 May and 400 July.

 

 

Minneapolis Grain Exchange

 

MGE saw light volume trade until the last 20 minutes of the session when the sell-off began at the CBOT, a floor trader said. The market was largely a follower of activity in Chicago, he said.

 

In other news, initial payments for wheat during the 2006-07 crop year will be increased on March 29, according to the Canadian Wheat Board. The increase in initial payments for wheat will range from CUS$6.90 to CUS$31.25 per metric tonne, depending upon the grade and class.