April 11, 2006

 

US Wheat Outlook on Tuesday: Down on 'Turnaround Tuesday', crop improvement

 

 

U.S. wheat futures are called to open 3 cents to 4 cents a bushel lower Tuesday as the market reverses course from recent sharp gains in typical "Turnaround Tuesday" fashion and on slight improvement in the winter wheat crop, sources said.

 

In overnight e-cbot trade, May wheat fell 3 1/4 cents to $3.57 3/4 and July fell 2 3/4 cents to $3.71 a bushel.

 

Weekly crop ratings issued Monday afternoon showed a slight improvement from the previous week. Forty-one percent of the U.S. winter wheat crop was in good to excellent condition as of Sunday, compared to 38% the previous week, the U.S. Department of Agriculture said. The number was well below the 70% year-ago level.

 

"The (winter wheat) rating was higher than we thought it was going to be," said Dale Gustafson, analyst at Citigroup Global Markets in Chicago.

 

The Kansas HRW crop was 42% good to excellent, up from 38%; Oklahoma's numbers were unchanged with just 11% good and none in excellent shape; and Texas also was unchanged at just 7% good to excellent.

 

A report by the Texas Agricultural Statistics Service highlighted the depth of the problems there, and said the state's farmers stand to harvest just 41 million bushels of wheat this year due to drought, a 57% drop from 2005 levels.

 

Thirty percent of the entire U.S. winter wheat crop was in very poor to poor condition, compared to 31% the previous week, the USDA said.

 

Soft red winter states are faring much better, with Illinois at 77% good to excellent versus 76% the previous week; Arkansas was 72% good to excellent compared to 67%; Ohio's crop was 75% good to excellent versus 73% last week; and Missouri was 68% good to excellent compared to 69% last week.

 

"In Chicago, crop prospects look favorable but there's no demand," said Gustafson.

 

The U.S. spring wheat crop was 4% planted as of Sunday, compared to 10% planted one year ago and the five-year average of 7%, according to the USDA. Excessive moisture and flooding in some areas has slowed planting efforts, which helped rally Minneapolis Grain Exchange wheat prices on Monday.

 

Meanwhile, HRW wheat futures rallied Monday on forecasts for continued dry weather in the southern Plains, which is seen cutting sharply into yields. The southern Plains are expected to remain dry through the week, with above to much above normal temperatures. More rain is needed in western areas of the HRW belt, while recent rains have improved conditions in eastern areas, DTN Meteorologix said.

 

In the northern Plains, scattered showers with 0.10-0.25 inch of rain was seen in the last 24 hours. Mostly dry conditions are expected for the remainder of the week and into the weekend, with a chance for a few light showers on Wednesday, Meteorlogix said.

 

In other news, Ukraine planted spring wheat on 50,400 hectares to April 11, which equals 8% of the planned total area. The country is planning more spring wheat this year - 614,500 hectares versus 480,000 in 2005 - due to losses to the winter wheat crop from a severe cold snap last winter.

 

In export news, Japan is seeking 125,000 metric tonnes of wheat for June 1-30 shipment in a tender to be concluded on Thursday.

 

Tuesday marks the third day of the Goldman roll, which often leads to increased activity as traders positions themselves ahead of the April 28 first notice day. The roll will end with Thursday's market close.