April 10, 2007

 

US Wheat Review on Monday: Ends mixed; backpedals from strong gains

 

 

U.S. wheat futures ended mixed Monday after rallying in early trading on concerns about crop damage from cold weekend weather, traders and analysts said.

 

Chicago Board of Trade May wheat ended up 2 1/2 cents at US$4.47 1/2 per bushel, Kansas City Board of Trade May wheat closed 1 1/4 cents lower at US$4.68, and Minneapolis Grain Exchange May wheat ended down 1 1/2 cents at US$4.96.

 

The session high for CBOT May wheat was US$4.75.

 

The developing U.S. winter wheat crop appears to have suffered substantial damage after extended periods of freezing weather hit growing areas over the weekend, agronomists said. The wheat markets, however, had already seen strong gains on the weather concerns on Thursday and in overnight trading, floor traders noted.

 

On Monday, the movement ran out of stream, traders and analysts said.

 

"When the market trades weather, you tend to trade air," said John Kleist, senior analyst with Top Third Ag.

 

Also, the markets usually "kill" the wheat crop several times during a growing season, Kleist added.

 

"You had all that uncertainty but ... wheat gets killed so many times," he said.

 

Looking at prelimary damage assessments from the cold snap, at least half of Illinois' winter wheat crop was "damaged substantially" by the cold, said Emerson Nafziger, a professor of agronomic extension at the University of Illinois at Urbana-Champaign. The plants suffered frozen heads and leaves as temperatures dipped into the upper teens and low 20s in southern Illinois.

 

The plants were more vulnerable to the cold because they were more advanced than usual, and it's not clear how much of the injured plants will come back from the damage, Nafziger said. The damage may push some farmers to abandon the wheat and plant corn instead this spring, he said.

 

Some Missouri farmers are already looking into spraying herbicide on their wheat so they can replace it with corn, said Jay Chism, agronomist with the University of Missouri Extension. It appears some of the crop suffered head damage, although it's difficult to tell right so soon, he said.

 

"They feel like there's no reason to harvest partial crop," Chism said about the farmers considering abandoning their wheat.

 

Looking ahead, Kleist said the wheat markets might "take a pause" until more specific field reports about the damage from the cold come out.

 

On Tuesday, the USDA is expected to trim 2006-07 U.S. wheat carryout in its April supply and demand report because of increased feed usage, analysts said. The report is due out at 8:30 a.m. EDT (1230 GMT).

 

According to a Dow Jones Newswires survey of 12 analysts, the average expectation for April carryout is 449 million bushels, compared to March carryout of 472 million.

 

 

Kansas City Board of Trade

 

KCBT rallied on fears about the cold weather but trimmed gains because the market had already built in some of the concerns last week and in overnight trading, a floor trader said. Still, the talk on the floor was that the damage to the crop appeared to be serious, he added.

 

The declines during the session "surprised everybody," he said.

 

"It just couldn't hold the gains," he said about the market. The full spectrum of damage "is going to take awhile to sort out. I figured we'd hold the gains for today before people come in thinking, 'It's not as bad as we thought.'"

 

 

Minneapolis Grain Exchange

 

MGE wheat futures were largely a follower, a floor trader said. Prices went up on the weather fears with the CBOT and KCBT and followed when they broke, he noted.

 

The supply/demand report is not expected to be a big event Tuesday, the trader added. Weather should remain the main focus for traders, he said.

 

In other news, the USDA reported weekly wheat export inspections for the week ended April 5 were 12.798 million bushels, while analysts had predicted inspections of 11 million to 16 million bushels. The export inspections were down from a week earlier, when the USDA reported 17.832 million bushels had been inspected.

 

Traders said the inspections data took a back seat to the weather.