April 4, 2007

 

US Wheat Review on Tuesday: Stumbles lower on corn, fund selling

 

 

U.S. wheat futures on Tuesday stumbled lower for the third consecutive session amid spillover pressure from the neighboring corn market and some fund selling, traders said.

 

Chicago Board of Trade May wheat settled 9 cents lower at US$4.19 per bushel. Kansas City Board of Trade May wheat closed down 3 1/4 cents at US$4.42 1/4, and Minneapolis Grain Exchange May wheat ended down 6 1/2 cents at US$4.75.

 

Weakness in the CBOT corn market provided downside leadership for wheat and pulled prices lower, analysts said.

 

"When the corn failed, wheat had no choice but to weaken along with it," said Dale Durchholz, analyst with AgriVisor Services Inc.

 

Funds sold an estimated 2,000 wheat contracts at CBOT. In CBOT pit trades, Citigroup bought 1,000 December, while Rand Financial bought 800 July and ABN Amro bought 600 July. Tenco spread 1,000 May/July. JP Morgan and Rand Financial each spread 1,000 May/July. Citigroup spread 800 December wheat/December corn.

 

Crop ratings that showed 71% of the U.S. winter wheat crop in good-to-excellent condition also were negative, although the strong ratings were largely expected, Durchholz said.

 

"I don't know that the crop ratings were a huge surprise," he said.

 

Losses in wheat appear to have been tempered slightly by forecasts for cold weather in the U.S. Plains this weekend, analysts said.

 

Below-freezing temperatures are increasingly probable across much of Kansas Saturday morning, T-Storm Weather said in an update to its daily forecast. It appears temperatures below 25 degrees Fahrenheit should focus across the northeastern third of the state, with temperatures in the mid-20s to 30 degrees Fahrenheit elsewhere, the update said.

 

"By Friday morning, it looks like most of the wheat areas will be in the low to mid-30s," said Mike Tannura, T-Storm meteorologist and commodity analyst. "Saturday morning is the one that persistently looks like it will be the coldest."

 

A layer of clouds would help keep temperatures from falling lower, he added. Soil that is wet from recent precipitation also is less likely to freeze in the cold weather, meteorologists noted.

 

"I don't really think its going to create much of a problem," Durchholz said about the cold weather. "But it serves as a warning flag. If we get into a pattern of having cold air incursions, we could have some problems."

 

 

Kansas City Board of Trade

 

The trade isn't "getting too excited" about forecasts for cold weather in the hard red winter wheat areas, a KCBT floor trader said.

 

Overall, pit volume was light during the day session and the funds were "pretty quiet," he said. In pit trades, Man Financial bought 900 July.

 

The market was looking at the losses in CBOT wheat and CBOT corn, the trader said. The bearish crop ratings also added a negative backdrop, he said.

 

Looking ahead, wheat is "going to be vulnerable to some kind of bounce in here," the trader said.

 

 

Minneapolis Grain Exchange

 

There was decent inter-market spreading early in the day session, and funds sold an estimated 1,000 July contracts, a floor trader said. Activity dulled as the day moved on and prices fell apart late in the session, he said.

 

Weakness in the CBOT corn market dragged prices lower, he said. There also was little fresh commercial or export business, the trader said.