March 31, 2007
US Wheat Review on Friday: Sharply lower on CBOT corn pressure
U.S. wheat futures broke sharply Friday with the Chicago Board of Trade May contract closing at its lowest level since Sept. 20 amid heavy spillover pressure from corn, analysts said.
CBOT May wheat closed down 23 cents at US$4.38 per bushel. Kansas City Board of Trade May wheat ended down 15 3/4 cents at US$4.56 1/2, and Minneapolis Grain Exchange May wheat closed down 17 3/4 cents at US$4.85.
The losses came as CBOT corn futures ended limit down, or 20 cents lower, in the first five contract months as a higher-than-anticipated U.S. planting intentions estimate from the U.S. Department of Agriculture prompted heavy selling, analysts said.
With traders and funds unable to sell in corn because the market was locked at limit down, there was spillover liquidation in wheat, the analysts said. Funds sold an estimated 4,000 contracts at CBOT.
The USDA pegged prospective corn plantings at 90.454 million acres, above trade estimates of 88.061 million. New estimates for U.S. wheat seedings also were higher than expected, although it was corn that dragged prices lower, traders said.
The USDA pegged winter wheat area at 44.505 million acres, above the average estimate of 43.982 million from a Dow Jones Newswire survey of analysts. Last year's seedings were 40.575 million.
Seedings for other spring wheat acres came in at 13.808 million, compared to estimates of 13.676 million and 2006 seedings of 14.899 million. Analysts had predicted the USDA would lower its estimate for some U.S. spring wheat acres because of a shift of farmland to corn.
Durum wheat intended acreage, meanwhile, was pegged at 1.990 million acres, versus the trade estimate of 1.977 million acres and last year's figure of 1.870 million.
All wheat seeded area was put at 60.303 million, compared to an estimate of 59.750 million and 57.344 million in 2006. At the USDA Agricultural Outlook Forum USDA pegged 2006 all-wheat planted acreage at 60 million.
The USDA pegged wheat stocks as of March 1 at 856 million bushels, while the trade estimate was 881 million bushels. In March 2006 stocks were 972 million bushels and last quarter stocks were 1.315 billion bushels.
The USDA was expected to drop its estimate for stocks because of slightly higher exports, a slowdown in imports and reports of some feedyards feeding wheat to cattle, analysts said. The decline foretells an increase in wheat feed usage in the USDA's April supply and demand report, some analysts added.
In CBOT pit trades, Rand Financial sold 2,000 July and bought 600 May.
Looking ahead, wheat futures will likely continue to follow corn, floor traders said. With favorable weather across the U.S. Southern Plains and ideas that the winter wheat crop has the potential for a big yield, with is not strong enough to rally on its own, they said.
Kansas City Board of Trade
KCBT wheat futures tumbled lower under pressure from CBOT corn, just as CBOT wheat did, a floor trader said. The USDA estimates for wheat didn't look particularly bearish, he added.
There remains fundamental pressure on KCBT wheat futures from favorable weather conditions, analysts said.
Widespread rains in U.S. Southern Plains remain beneficial for the hard red winter wheat crop, according to DTN Meteorlogix. Scattered storms have dropped up to an 1.5 inches of rain from southeast Kansas to northeast Texas and lesser amounts to the east, the weather firm said.
Friday and Saturday will see another 1.5 inches of rain across the area, with diminishing amounts into Sunday and Monday, the firm said.
"People want to be bearish wheat because the last three weeks have had perfect weather in the HRW winter states," said Tim Hannagan, analyst with Alaron Trading. "So far, it's been the most perfect weather you could have for the HRW wheat acres."
Minneapolis Grain Exchange
MGE was a follower to losses in the CBOT corn and wheat markets, a floor trader said. By the end of the day session, MGE May wheat hit its lowest price since Jan. 10. and closed at its lowest level since Jan. 10.
