April 14, 2006

 

US Wheat Review on Thursday: Defensive posture ahead of holiday

 

 

U.S. wheat futures fell Thursday on position-squaring ahead of the long holiday weekend and as some nervous positions, unsure what the weather forecasts might bring, bailed out, sources said.

 

Commodity markets will be closed for the Good Friday holiday, and trade will resume Sunday evening with the e-CBOT electronic session and Monday morning for the regular open-outcry session.

 

Basis nearby May wheat contracts, Chicago Board of Trade settled 3 cents lower at US$3.57 1/2, Kansas City Board of Trade fell 5 3/4 cents to US$4.56 1/2 and Minneapolis Grain Exchange lost 2 1/2 cents to US$4.30 1/2.

 

"There was a little position-evening going into the weekend. And with this market being weather-based, we also saw some of the more nervous positions getting out on either side of the market," said Shawn McCambridge, senior grains analyst at Prudential Financial in Chicago.

 

Short-covering lifted prices in late activity, but that was countered by a fresh round of selling that held prices in lower territory by the closing bell, he said.

 

The week saw wheat futures climb to fresh contract highs in Kansas City and Minneapolis on concerns over the hard red winter crop and on hard red spring plantings. Even Chicago reached a four-week high, despite the soft red winter crop in the Midwest developing quite well.

 

Traders were content to take profits after pushing prices so high, while speculative and fund buying has evaporated in the past two sessions.

 

"We put some pretty good gains on in here, and I just think some people wanted to take the money home and reassess the situation on Monday and put the position back on if the fundamentals support that," McCambridge said.

 

Funds were net sellers of about 1,000 wheat contracts as of 1:30 p.m. EDT.

 

Spread trading was active once again, led by Fimat spreading 3,000 July/May, Rosenthal spreading 3,000 May/July and J.P. Morgan spreading 1,500 May/July.

 

Spreading among the market has been active this week and the weaker close in Kansas City versus Chicago may have resulted from traders unwinding some KCBT/CBOT spreads, McCambridge said.

 

Outright buyers and sellers in Chicago were light and scattered.

 

Light commercial activity from FCStonnee selling 600 July also provided pressure.

 

 

KANSAS CITY BOARD OF TRADE

 

KCBT wheat fell on profit-taking ahead of the holiday weekend. While deteriorating HRW crop conditions are likely to be seen in the southern Plains after another week of hot, dry, windy weather, traders were content to book some profits after the recent rally, a trader said.

 

Good support is expected to remain in the market if the adverse weather on the southern Plains continues. The hot, dry conditions are "severely stressing pastures and accelerating the development of drought-stricken winter grains," the U.S. Department of Agriculture's Joint Agricultural Weather Facility said Thursday.

 

The six- to 10-day outlook for April 18-22 calls for warmer- and drier-than-normal weather across the central one-third of the U.S., including the Plains and Mississippi Valley.

 

Some spread unwinding between the KCBT and CBOT also pressured the market, a trader said.

 

 

MINNEAPOLIS GRAIN EXCHANGE

 

MGE futures fell slightly amid the weakness in Kansas City and Chicago on profit-taking-type activity, after prices had rallied to new highs earlier in the week on planting concerns.

 

May wheat traded to a three-session low of US$4.29 in quiet dealings.

 

HRS plantings were 4% complete as of last Sunday, below the five-year average, due to flooding and soggy conditions in some areas.

 

Scattered showers were seen in parts of the Dakotas Thursday, but overall dry weather this week is promoting fieldwork throughout the region, the USDA says.