April 8, 2008

 

US Wheat Review on Monday: Most contracts fall hard on profit-taking

 

 

Most U.S. wheat futures tanked Monday on profit-taking as the markets gave back gains from a rally Friday, traders and analysts said.

 

Chicago Board of Trade May wheat fell 53 cents to US$9.21 1/4 per bushel. Kansas City Board of Trade May wheat dropped 49 1/4 cents to US$9.79 1/4, and Minneapolis Grain Exchange May wheat rose 15 cents to US$13.50.

 

Traders booked profits amid ideas that Friday's gains were a bit overdone, analysts said. The markets also lost their spillover support from MGE May wheat, which had boosted the other markets with three consecutive limit-up closes last week, they said.

 

MGE May wheat briefly rose the exchange-imposed limit of 60 cents Monday before trimming gains. With the contract trading freely, there was no reason to buy CBOT wheat, said Chad Henderson, analyst for Prime Agricultural Consultants.

 

"I think the people who are selling today are the ones who were questioning the rally late last week," Henderson said.

 

Commodity funds sold an estimated 4,000 contracts at the CBOT.

 

The markets have bearish expectations that the upcoming new-crop harvest will loosen tight global ending stocks, analysts said. Farmers are thought to have planted a big crop in the Northern Hemisphere, and world weather conditions generally look good, an analyst said.

 

"As we start to see more of this wheat come out of dormancy, not only in the U.S. but all across the Northern Hemisphere, there's probably more optimism on the way," said Joe Victor, vice president of marketing for Allendale. "We really don't see any major weather problems on the way."

 

The U.S. Department of Agriculture on Wednesday is slated to issue its April supply and demand report. The average of analysts' estimates for 2007-08 wheat carryout is 261 million bushels, up from 242 million in March, according to a Dow Jones Newswires survey of 13 analysts.

 

 

Kansas City Board of Trade

 

KCBT wheat futures erased Friday's gains amid a lack of fresh supportive inputs, traders said. There are still concerns about dryness in the western U.S. Plains, although it looks as though moisture may be headed for the region.

 

"The threat for rain across driest hard red winter wheat in southeast Kansas/southeast Colorado continues to increase," T-Storm Weather said in an update to its daily forecast.

 

The USDA at 4 p.m. EDT will issue its first weekly crop progress report of the year. The report may not be too useful as it is still early in the growing season, a trader said. Still, the markets will keep a close eye on the weather moving forward, he said.

 

"It's really hard to put much of a (bullish) weather spin" on the market, Henderson said. "This week's weather forecasts are a little more negative."

 

 

Minneapolis Grain Exchange

 

MGE May wheat closed modestly higher after rising the 60-cent limit overnight and closing limit up three days last week. Short-covering helped the contract stay in positive territory, although it ended well off session highs, an analyst said.

 

Traders seemed to "give up the ghost" on the MGE May rally because there was not a corresponding rally in the cash market for spring wheat, traded at the exchange, a floor trader said. There were rallies in the cash and futures markets in late February when MGE March wheat made a historic run to US$25.

 

"This time it seemed like the futures were kind of running on their own," the floor trader said.