April 12, 2006

 

US Wheat Review on Tuesday: New highs on fund buys, dry human rights watch forecast

 

 

U.S. wheat futures rose Tuesday, led by new contract highs in Kansas City, on follow-through fund and speculative buying and on forecasts for dry conditions to persist in the southern Plains, sources said.

 

Minneapolis also set new contract highs on soggy conditions in the northern Plains putting early plantings behind schedule.

 

May KCBT settled 12 cents higher at US$4.62 and made a new contract high of US$4.63 1/2. MGE May gained 7 1/4 cents to US$4.37 3/4, after setting a new high of US$4.41. CBOT May added 6 1/2 cents at US$3.67 1/2 and hit a four-week high of US$3.69 1/2.

 

"In the spring wheat ... it's too wet and that's forcing the market to try and buy some acres," said Brian Hoops, senior market analyst and president of Midwest Market Solutions in Yanktonne, S.D.

 

"Then when you have the crop problems that you're having down in the hard red wheat belt, you're going to have foreign exporters turn to hard red spring wheat to try and fill some of those high-protein-type needs," he added.

 

Therefore, the market can't afford a big HRS crop problem since exporters will depend on that for their needs.

 

Chicago wheat futures benefited from continued speculative interest and spillover support from the KCBT and MGE.

 

The soft red winter crop, traded at the CBOT, is in overall good condition, with no real crop concerns at this point, sources noted. The Dow Jones Newswires crop index, in which 100% is considered normal, pegs the SRW crop at 105% of normal, up from 102% in the year-ago period.

 

Weather conditions are key for the wheat market, however, and current forecasts point to continued dryness in the southern Plains. Dry, windy weather is maintaining harsh conditions for drought stressed winter grains, the USDA's Joint Agricultural Weather Facility said Tuesday.

 

The National Weather Service six- to 10-day outlook calls for drier-than-normal conditions across the southern half of the Plains.

 

By contrast, warmer weather in the central and northern Plains is promoting winter wheat development in areas with adequate soil moisture, the USDA said.

 

As of 1330 EDT, funds had purchased 4,000 CBOT wheat contracts, led by Calyon Financial buying 1,200 May, Man Financial buying 1,000 May, Rand Financial buying 1,000 December and Tenco buying 700 May and R.J. O'Brien buying 700 May.

 

Sellers were light, with UBS shedding 300 May, Rosenthal selling 300 July, Fimat and Tenco each selling 200 July and Goldenberg-Hehmeyer and Shatkin Arbor each selling 200 May.

 

 

KANSAS CITY BOARD OF TRADE

 

KCBT wheat futures charged to new contract highs as forecasts call for continued hot, dry conditions in the southern Plains HRW belt, which will put additional stress on the crop.

 

While the overall U.S. winter wheat crop improved slightly this week to 41% good to excellent, additional dryness is expected to negatively impact drought-stressed wheat in Texas and Oklahoma, where the crops are a respective 74% and 62% poor to very poor, sources said.

 

To look at it another way, a full 30% of the U.S. winter wheat crop was very poor to poor as of last Sunday, up slightly from 31% the previous week but still in overall bad shape, a trader said.

 

The Texas Agricultural Statistics Service estimates this year's crop at 41 million bushels, which would be the lowest since 1971. Oklahoma is also down and Kansas "could be down as well if they don't get much moisture," said Hoops.

 

While speculative profit-taking could develop in the market at any time, two days of solid gains topped off by new contract highs has left the "door open for higher prices," he said.

 

 

MINNEAPOLIS GRAIN EXCHANGE

 

MGE wheat futures rallied to new contract highs on fears that plantings, which are behind schedule, will continue to lose ground and maybe even lose acres to crops such as corn, sources said.

 

"The market's always trading that fear before the actual fact occurs so the market has to rally to try and keep pace with that," Hoops said.

 

Spring wheat planting was 4% complete as of Sunday, compared to 10% one year ago and the 7% five-year average, the USDA reported.

 

A floor trader said that the moisture and flooding concerns in North Dakota's Red River Valley are likely "overblown" at this point, but MGE wheat is "struggling" to keep pace with the torrid gains in Kansas City, he noted.

 

ADM bought a net 1,100 July, 400 May and 300 September, UBS was a net buyer of 300 July and 300 December, Prudential Financial bought 300 July, 200 September and 300 December, the trader said.

 

Country Hedging sold an estimated 400 May, 300 July and 400 December.