April 13, 2007

 

US Wheat Review on Thursday: Rebounds higher as corn trims losses

 

 

U.S. wheat futures closed higher Thursday in a turnaround from earlier losses fueled by a move to trim losses in the neighboring corn market, traders said.

 

Chicago Board of Trade May wheat ended up 1 3/4 cents at US$4.58 per bushel. Kansas City Board of Trade May wheat finished 8 1/2 cents higher at US$4.84 1/2, and Minneapolis Grain Exchange May wheat settled 2 1/4 cents higher at US$5.07 1/4.

 

Market participants were watching activity in CBOT corn as they continued to wait for more information about U.S. crop conditions after a hard weekend freeze, traders said. Underlying price support came from concerns that winter wheat may have suffered significant freeze damage, they added.

 

There are some thoughts that hard red winter wheat in the Plains may be able to bounce back from freeze damage but that damaged soft red winter wheat in the Midwest may be torn out and replaced with other crops this spring, a grain analyst said. It will take several more days to determine the extent of damage to the crops, he noted.

 

SRW wheat areas, including southern Illinois and Missouri, also are too wet to plant any new crops now, the analyst said. If wheat is abandoned, it could be replaced with corn or soybeans, he said.

 

Short-covering also helped boost the late gains in wheat, a CBOT floor broker added. Funds bought an estimated 500 contracts at CBOT. Rand Financial bought 500 July in CBOT pit trades, while Man Financial sold 400 July.

 

There was some support early in the session from strong weekly U.S. wheat export sales, analysts said.

 

The U.S. Department of Agriculture reported export sales for the week ended April 5 were 693,300 metric tonnes, above trade expectations of 200,000 to 450,000 tonnes. The sales were 67% above the prior four-week average, the USDA said.

 

Big buyers included Japan, which took 144,200 tonnes, and Egypt, which bought 55,400 tonnes. Unknown destinations bought 161,000 tonnes, according to the USDA.

 

 

Kansas City Board of Trade

 

KCBT led the upside. Wheat futures bounced higher when CBOT corn began trimming its losses, a floor trader said. That allowed wheat to rally and sparked some short covering by locals, he added.

 

Concerns also remain high about possible damage from a freeze last weekend, although producers are still working to assess damage from the cold snap. Adding to the concern, rain and snow are in store for the Southern Plains during the end of this week, according to the DTN Meteorlogix weather firm.

 

"Wheat plant stems that may have been weakened by the cold are in danger of lodging, which would result in lower yields at harvest," Meteorlogix said.

 

Lodging is when the plant falls over.

 

As much as 10 inches of snow may fall in some areas, and the event should bury some developing winter wheat, according to T-Storm Weather, another forecasting service. Liquid equivalent should exceed 1 inch in much of Colorado and Kansas, T-Storm said.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures were mostly a follower of CBOT, a floor trader said. Wheat is expected to take direction from crop assessments and the weather in the near term, he said.

 

The USDA on Monday is slated to release its weekly crop conditions ratings, which are sure to be closely watched by the trade, the trader said.

 

In other news, rotating strike action by 2,800 conductor and rail yard workers employed by Canadian National Railway (CNI) has the potential to create service delays for the Canadian Wheat Board, an official with the CWB said. The potential for further service disruptions follows the fact that CN was never able to catch up on its regular grain and oilseed shipping service after the labor disruption that occurred in February.