April 15, 2008

 

US Wheat Review on Monday: MGE may falls limit on weak cash prices

 

 

U.S. wheat futures closed mostly lower Monday, with old-crop Minneapolis Grain Exchange contracts tumbling the daily limit on spreading and a weakening cash market for spring wheat, traders said.

 

Chicago Board of Trade May wheat slipped 1/2 cent to US$8.96 per bushel. Kansas City Board of Trade May wheat shed 3 cents to US$9.50 3/4, and MGE May wheat fell the 60-cent limit to US$12.32.

 

CBOT wheat futures ended mixed as spillover pressure from the sharp losses in Minneapolis weighed on the market, a trader said. CBOT wheat was firmer earlier in the session on borrowed strength from rallies in soybeans and corn, he said.

 

There was some unwinding of long MGE/short CBOT wheat spreads, said Brian Hoops, president of Midwest Market Solutions. Traders had been putting on those spreads through the winter and spring, he said.

 

Commodity funds bought an estimated 1,000 contracts at the CBOT.

 

Not much fresh news was out for the markets, analysts said. Traders are waiting for the U.S. Department of Agriculture to issue updated ratings for the winter wheat crop at 4 p.m. EDT.

 

Condition ratings are expected to improve by 1 to 2 percentage points due to beneficial rains in the U.S. Plains, traders and analysts said. A week ago, the USDA said 45% of the crop was good to excellent.

 

 

Kansas City Board of Trade

 

Forecasts for more moisture in the U.S. Plains and expectations that the USDA will raise crop condition ratings were bearish for KCBT wheat futures, Hoops said. Precipitation in the Plains last week will help improve the condition of wheat in central and eastern sectors of the region, DTN Meteorlogix said.

 

Traders will continue watching forecasts for precipitation in the Plains, Hoops said.

 

More rain is still needed, especially in the west, Meteorlogix said.

 

A freeze in the Plains this weekend turned out to be a non-event for the markets, an analyst said. Oklahoma's winter wheat crop will probably not suffer much damage because plants are not in the boot stage of development yet, said Jeff Edwards, small grains extension specialist at Oklahoma State University.

 

 

Minneapolis Grain Exchange

 

Softening cash prices for spring wheat and spreading put pressure on MGE wheat futures, floor traders said. The situation was a reverse from a record-breaking rally earlier this year, during which rising cash prices supported gains in the futures market.

 

"As the price for cash weakens, the futures are following," a trader said.

 

MGE July wheat briefly fell limit down but trimmed losses before the close. The May/July spread has been trading in a range of US$2-US$2.30 lately but was only bid at about US$1.50 at one point during the session, a trader said. The spread closed at US$2.

 

The USDA is expected to estimate spring wheat planting at about 10%-15% complete, traders said. Last week, planting was 5% complete.