April 11, 2007

 

US Wheat Review on Tuesday: Crop-damage concerns push prices higher

 

 

Concerns about the condition of the developing U.S. winter wheat crop after a severe cold snap during the weekend pushed wheat futures to solid gains Tuesday, analysts said.

 

Chicago Board of Trade May wheat finished 10 1/4 cents higher at US$4.57 3/4 per bushel. Kansas City Board of Trade May wheat closed up 9 1/2 cents at US$4.77 1/2, and Minneapolis Grain Exchange May wheat settled 11 3/4 cents higher at US$5.07 3/4.

 

The session high for CBOT May wheat was US$4.63 1/2.

 

Reports about freeze damage to the winter wheat crop are coming into the markets and indicate injuries were substantial, analysts said. Still, they said it will be at least several days before wheat growers have a more accurate idea about damage.

 

Uncertainties about the condition of the crop and the problems caused by the freeze will likely support wheat futures for the next two weeks, said Louise Gartner, analyst with Spectrum Commodities.

 

"I think it's going to take that long to really assess what damage you can assess," she said. "It'll be at harvest when you get the final assessment."

 

The U.S. Department of Agriculture reported Monday afternoon that 64% of the winter wheat crop was in good-to-excellent condition as of April 8, down from 71% as of April 1.

 

Kansas, the country's top wheat-producing state, had 55% of its crop in good-to-excellent condition, down sharply from 77% a week earlier, the USDA said. Sixteen percent of Kansas' crop was rated very poor-to-poor, up from 4% a week earlier.

 

There was further support for wheat from the USDA's April supply/demand report, analysts said. The agency forecast U.S. all-wheat ending stocks at 422 million bushels, below the 449 million expected by analysts and the USDA's February estimate if 472 million.

 

"Feed and residual use is raised 25 million bushels as the March 1 stocks indicated higher-than-expected use in the December-February quarter," the USDA said about wheat demand.

 

The new "feed and residual" use forecast is for 170 million bushels, up from the March forecast of 145 million bushels.

 

Funds added strength to CBOT prices by buying an estimated 3,000 contracts. In pit trades, Fortis bought 1,500 May, while Tenco sold 800 May.

 

 

Kansas City Board of Trade

 

KCBT wheat futures rose on worries about freeze damage to crops, a floor trader said. The decline in the USDA's crop progress ratings was bullish, he added.

 

Producers are out in the fields as much as they can be, trying to assess the damage from the cold, the trader said. "The reports that we're getting from producers in some areas are pretty bad," he said.

 

Still, some market participants "simply do not believe that frost will kill the crop," he added. They view weather-related rallies as major selling opportunities, which pressure prices lower, he said.

 

Looking ahead, weather should remain the focus of the market for the next several weeks, the trader said.

 

 

Minneapolis Grain Exchange

 

Concerns about the crop condition were the main driver, a MGE floor trader said. It also was a bullish surprise that the USDA raised its export forecast in the April supply/demand report, he said.

 

U.S. wheat exports, the USDA said, are now predicted to reach 900 million bushels, up from 875 million bushels.

 

"No one expected that," the trader said.