April 4, 2006

 

US Wheat Review on Monday: Ends lower on US rains, technicals

 

 

U.S. wheat futures ended lower Monday on prospects for improved U.S. winter wheat conditions after better-than-expected weekend rains fell in Kansas and Oklahoma hard red winter wheat fields and the U.S. Midwest soft red winter wheat belt, brokers said.

 

Disappointing U.S. weekly wheat export inspections also weighed on U.S. wheat futures, while technical sales pressured Chicago Board of Trade May wheat after the contract fell below its 100-day moving average of US$3.48 1/2 and 10-day average of US$3.44 1/2 per bushel.

 

Minneapolis Grain Exchange spring wheat futures trailed losses in CBOT and KCBT following USDA's report Friday of a 1% drop in expected 2006 spring wheat acreage and as traders began to worry about potential flooding in the key Red River Valley ahead of spring plantings.

 

CBOT May wheat closed down 5 3/4 cents at US$3.42. July ended down 6 1/2 cents at US$3.55, just below its 10- and 100-day moving averages.

 

Speculative funds sold at least 2,000 contracts, brokers said. Calyon Financial sold 1,000 May; Citigroup sold 500 May; Fimat bought 1,000 July and traded 200 May; Man Financial sold 300 May; JP Morgan sold 300 May and 200 July; and R.J. O'Brien bought 300 May, brokers said.

 

CBOT wheat spread trade was active, with O'Connor and Co. spreading 6,000 July/May; Rosenthal Collins spreading 3,000 May/July; and Rand Financial and the Refco division of Man Financial each spreading 1,000 May/July, they said.

 

Weekly U.S. wheat export inspections were bearish, brokers said. The U.S. Department of Agriculture reported weekly U.S. wheat export inspections totaled 11.699 million bushels, below analysts' estimates and below the previous week's 15.538 million bushels.

 

Midday spot U.S. HRW and SRW Gulf barge bids were unchanged, cash sources said.

 

The USDA will release its first national crop progress data of the year at 3 p.m. CDT Monday.

 

Some U.S. wheat traders expected the USDA to report winter wheat conditions in the 40s-percent good to excellent, well below last year's 68% and below the 10-year average of 54%. Others said it was too early to peg an overall rating.

 

"Over the past 10 years, that first report has ranged from a low of 27% good-to-excellent in 1996 to a high of 77% in 1997," said Bill Nelson of AG Edwards.

 

"The soft red is OK and the wheat on the West Coast ought to be OK, but obviously wheat from Oklahoma and Texas will be low," said Sid Love, of Kropf & Love Consulting.

 

In global wheat news, Ukraine needs to replant 688,000 hectares of winter grains damaged by unusually severe winter frosts, not 733,200 hectares as was forecast March 15, the country's ministry said early Monday.

 

Later in the day, the ministry said Ukraine planted spring grains on 254,000 hectares as of March 31, or 4% of the planned total area, compared with about 460,000 hectares on the same date last year. This year's spring planting campaign has been delayed 7-10 days by cold weather.

 

 

Kansas City Board of Trade

 

KCBT May hard red winter wheat settled down 3 1/2 cents at US$4.15, with resistance holding at the 20-day average of US$4.20 and support seen at the 10-day moving average of US$4.09 1/4.

 

KCBT July closed down 3 3/4 cents per bushel at US$4.19 1/4, below the 50-day moving average of US$4.21 3/4. Support was seen at the 10-day moving average of US$4.13 1/2.

 

Among featured trades, Fimat bought a net 300 July by midday; ADM bought a net 1,000 May; Frontier Futures bought 200 July; and UBS sold 300 July, brokers said.

 

Spot cash 11% and 12% U.S. hard red wheat basis bids were unchanged Monday, while bids for 13% and 14% HRW fell 1 cent, according to the KCBT.

 

Traders noted midday forecasts suggested next week's storms would be more likely to hit northern U.S. wheat growing areas, with pre-planting flooding concerns lifting MGE spring wheat futures versus KCBT hard red wheat.

 

 

Minneapolis Grain Exchange

 

MGE May wheat settled down 1 3/4 cents at US$4.02 1/2 after filling a gap left Friday after the USDA forecast of a 1% drop in U.S. 2006 spring wheat plantings.

 

Chart support for MGE May wheat was seen at the 10-day moving average of US$3.98.

 

July wheat ended down 1 3/4 cents at US$4.08 1/4, with support also seen at the 10-day moving average of US$4.03 3/4.

 

"There was some buying of MGE and selling of CBOT wheat, and trade of May/July but flat trade was relatively light," one broker said.

 

Farmer sales have slowed sharply after the recent price downturn, he noted.

 

Meanwhile, he noted that boats would begin to be loaded in Duluth, Minn., this week.

 

Cash spring wheat basis bids were steady Monday, cash sources said. Monday's Minneapolis wheat receipts totaled 129 railcars versus last year's 150 railcars. There were no durum receipts.