March 28, 2007

 

US Wheat Review on Tuesday: Closes lower on good US crop condition

 

 

U.S. wheat futures stumbled Tuesday amid pressure fromideas the U.S. has the potential to produce a big winter wheat crop, analysts said.

 

Chicago Board of Trade May wheat closed down 4 cents at US$4.54 per bushel, Kansas City Board of Trade May wheat ended 6 3/4 cents lower at US$4.70 1/4, and Minneapolis Grain Exchange May wheat finished down 3 1/4 cents at US$4.95 3/4.

 

It was the lowest close for CBOT May wheat since Sept. 27.

 

Ideas the U.S. winter wheat crop is in good condition weighed on prices as the trade continues to look ahead to the release of the U.S. Department of Agriculture's planting intentions and grain stocks report on Friday, said Greg Wagner, director of marketing and risk management for Horizon Ag Strategy.

 

"Basically, the wheat crop is shaping up really well," Wagner said. "You've got a huge wheat crop coming on, so it's anticipation."

 

Indeed, moisture in the U.S. Southern Plains has been giving more of a boost to wheat crops recently, DTN Meteorlogix said. Rains and warm temperatures are favorable for the hard red winter wheat crop, the weather firm said.

 

There also is a lack of fresh demand news to support prices, an analyst added.

 

Egypt's state-owned General Silos and Storage company Tuesday canceled a tender to buy between 25,000 and 60,000 tonnes of wheat, on a cost and freight basis, for shipment during April, traders said. There were five offers at the tender and they were all deemed too high, a Cairo-based trader said.

 

Fund selling of an estimated 1,000 contracts at CBOT further pressed on prices during relatively thin activity, a floor trader said. In pit trades, Man Financial bought 300 May, and Rosenthal bought 300 December. RJ O'Brien sold 300 December.

 

Trading was choppy as some market participants sat on the sidelines, anticipating the release of the USDA reports. They will provide new indications about the size of the U.S. corn crop this spring. Farmers are expected to plant more corn, at the expense of other crops, to take advantage of high prices and demand for ethanol.

 

The USDA reports are due to be released Friday at 8:30 a.m. EDT.

 

Until then, wheat will likely struggle to find its footing amid bearish fundamental factors, traders said. A strong rally in CBOT corn, however, could help lift wheat higher, an analyst noted.

 

 

Kansas City Board of Trade

 

Volume at KCBT was relatively strong, compared to recent thin trading days, a floor trader said. Bulls were unable to generate a rally, despite an early round of buying and attempts to correct the May/July spread, he added.

 

The improvement in Kansas' wheat condition weighed on KCBT wheat futures, Wagner said. The amount of Kansas' wheat rated in good-to-excellent condition rose to 72% in the week ended March 25 from 70% a week earlier, according to a weekly USDA crop report.

 

In pit trades, Frontier sold 400 May and 500 July. JP Morgan sold 600 July, while Fimat sold 400 May. UBS sold 400 December. ADM bought 400 December, and Man Financial bought 500 July.

 

KCBT July wheat closed down 9 1/4 cents at US$4.75 per bushel, its lowest close since Oct 31.

 

 

Minneapolis Grain Exchange

 

Inter-market spread liquidation against Chicago was a big feature of the day session, a MGE floor trader said. Market participants were buying Chicago and selling Minneapolis ahead of the release of the USDA report Friday, he said.

 

Trading activity was fairly busy during the day session, the trader added.