April 11, 2006

 

US Wheat Review on Monday: Higher on US weather, short-covering

 

 

U.S. wheat futures ended higher on Monday, led by a rally in bellwether new-crop Kansas City Board of Trade July wheat futures to a one-month high on speculative short-covering and worries about U.S. hard red winter wheat crop losses due to drought, brokers said.

 

Minneapolis Grain Exchange spring wheat futures ended higher on Monday on worries about excess moisture in U.S. Northern Plains wheat fields, brokers said.

 

Chicago Board of Trade soft red winter wheat futures trailed the two hard wheat markets higher despite bearish U.S. soft wheat fundamentals, they noted.

 

The U.S. Department of Agriculture on Monday lowered its forecast for 2005-06 U.S. wheat ending stocks to 532 million bushels from its March estimate of 542 million bushels, a supportive factor.

 

However, the government boosted its 2005-06 U.S. soft red ending stocks forecast by 20 million bushels to 96 million while dropping its hard red ending stocks forecast by 8 million to 133 million bushels and leaving its hard red winter wheat end stocks estimate unchanged.

 

Monday's supportive gains in precious metal and crude oil futures were partially offset by losses in CBOT corn on improved U.S. Midwest planting weather forecasts, brokers said.

 

CBOT May wheat settled up 9 3/4 cents at US$3.61 per bushel and July closed up 9 cents at US$3.73 3/4 per bushel.

 

Speculative funds were net buyers after buying at least 4,000 lots by 1330 EDT, CBOT brokers said.

 

R.J. O'Brien bought at least 1,000 July; Man Financial bought 800 May; Fimat bought 600 May and 500 July early; and JP Morgan bought 500 May and sold 700 July, brokers said.

 

CBOT wheat futures spread trade was again notable, with ABN Amro spreading 1,500 July/May and 500 May/July and JP MOrgan spreading early 600 July/May.

 

First notice day for deliveries against the three U.S. May wheat futures is April 28.

 

The CFTC reported Friday that non-commercial traders turned from a slight net long to a net short CBOT wheat futures and options stance as of April 4. They were net short 4,073 CBOT wheat futures and options.

 

Rolling of nearby U.S. wheat futures contracts continued on second day of Goldman roll, brokers say.

 

Midday spot U.S. HRW Gulf barge bids were not quoted Monday amid the KCBT rally, while spot U.S. SRW Gulf barge bids were unchanged, cash sources said.

 

Weekly U.S. wheat export inspections of 10.650 million bushels lagged expectations, brokers noted.

 

In other U.S. wheat export news, Taiwan on Monday sought 80,000 metric tonnes of U.S. No. 1 wheat for May-June shipment in a tender to be concluded Wednesday, a trader said.

 

In global wheat export news, Jordan said Monday it signed a contract to buy 100,000 metric tonnes of Syrian soft milling wheat outside the tender process, while India's first wheat imports in more than six years were likely to arrive around April 23, a senior official at the State Trade Corp. of India, or STC (512531.BY), said.

 

CBOT also noted floor rumors Monday that India's 2005-06 wheat production could be closer to 70 million metric tonnes than the USDA's estimate Monday of 72 million metric tonnes.

 

Kazakhstan's 2006 wheat crop was forecast at 11.5 million metric tonnes, up 500,000 tonnes from 2005 production, although much will depend on weather conditions during the remainder of the growing season, which is critical fo crop development, according to USDA attache report.

 

 

Kansas City Board of Trade

 

Forecasts for hot, dry weather in the U.S. Southern Plains hard red winter wheat belt during the next seven days sparked Monday's rally, with KCBT May gapping higher and ending up 20 cents at US$4.50 per bushel, brokers said.

 

Bellwether new-crop KCBT July closed up 21 cents at US$4.58 after setting a new one-month high of US$4.59 1/2 in the last few minutes. The late gains brought the March 10 contract high of US$4.62 1/2 within range, while the nine-day relative strength index, at 77, showed overbought signs, brokers said.

 

The CFTC said Friday that non-commercials boosted their long KCBT wheat futures and options position to 35,917 lots as of last Tuesday.

 

The hot, dry weather forecasts also trumped ideas that the USDA may announce late Monday a slight improvement in its weekly U.S. winter wheat crop rating, brokers said.

 

Last Monday, the USDA said 38% of the U.S. winter wheat crop was in good to excellent shape, well behind the 10-year average of 54% and last year's 68% in that shape.

 

Spot cash 11% through 14% U.S. hard red wheat basis bids were unchanged Monday, according to the KCBT.

 

 

Minneapolis Grain Exchange

 

MGE May wheat closed up 14 3/4 cents at US$4.30 1/2 per bushel. MGE July wheat ended up 13 3/4 cents at US$4.36 1/2, within sight of its March 10 contract high of US$4.44 per bushel.

 

New-crop September wheat ended up 12 3/4 cents at US$4.39 3/4 after setting a one-month high of US$4.40 1/2, also within striking range of its March 10 contract high of US$4.46.

 

The CFTC said Friday that non-commercials slightly cut their net long MGE wheat futures and options stance to 9,676 lots as of last Tuesday.

 

Cash spring wheat basis bids were steady to 15 cents per bushel lower Monday, cash sources said.

 

Monday's Minneapolis wheat receipts totaled 88 railcars versus last year's 203 railcars. There was one durum receipt versus last year's 130 cars.