April 2, 2008

 

US Wheat Review on Tuesday: Sags on follow-through pressure

 

 

U.S. wheat futures sagged Tuesday amid follow-through pressure from a bearish U.S. Department of Agriculture quarterly stocks estimate, traders said.

 

Chicago Board of Trade May wheat fell 34 cents to US$8.95 per bushel, its first close below US$9 since Jan. 10. Kansas City Board of Trade May wheat slid 15 cents to US$9.50, and Minneapolis Grain Exchange May wheat tumbled 39 cents to US$11.55.

 

The USDA's estimate for wheat stocks as of March 1, issued Monday, continued to weigh on the markets amid bearish expectations that the world will rebuild supplies with a big crop, analysts said. The government pegged quarterly wheat stocks at 710 million bushels, while the average of analysts' pre-report estimates was 668 million.

 

"People have to remember that wheat's global," said Jim Bower, owner of Bower Trading. "The global supply and demand table shows an increasing global supply of wheat."

 

Traders unwound long wheat/short corn spreads amid a lack of other fresh news for the wheat market, Bower said. The outlook for CBOT corn is seen as bullish as producers are expected to plant fewer corn acres this spring than expected.

 

"Wheat's the weak link in here," Bower said.

 

Commodity funds sold an estimated 2,000 contracts at the CBOT. Moving forward, wheat will remain a follower and could come under further pressure from setbacks in neighboring markets, an analyst said.

 

The daily trading limit for CBOT wheat futures Tuesday will return to 60 cents from 90 cents. KCBT and MGE wheat limits will remain 60 cents.

 

 

Kansas City Board of Trade

 

Ongoing dryness in western areas of the U.S. Plains hard red winter wheat belt underpinned KCBT wheat futures, an analyst said. Winter wheat areas of the southwestern and western Plains should continue struggling with a "major deficit in moisture" going into the first full month of spring, DTN Meteorlogix predicted in a forecast.

 

"We need a rain in that western hard red winter wheat belt," Bower said. "I think we could break another dollar lower if we could get a rain."

 

Kansas' wheat crop is rated 44% good to excellent, down 4 percentage points from last week, the state's National Agricultural Statistics Service office said in a new condition report. A year ago, 77% of the crop was seen as good to excellent.

 

The crop is estimated to be 10% jointed, compared to 38% last year and the five-year average of 22. Reports indicate that 4% of the state's total wheat acreage has been lost to winterkill, NASS said. Kansas growers planted 9.9 million acres of wheat for 2008-09, down from 10.4 million last year, according to the USDA.

 

 

Minneapolis Grain Exchange

 

Follow-through selling weighed on MGE wheat futures in thin volume, a MGE floor trader said. There were traders buying CBOT corn and selling wheat, he said.

 

There is "a true lack of any commercial involvement" on the buy side at the MGE, the floor trader said. It does not appear the commercial buyers will return anytime soon, he added.