April 17, 2007

 

US Wheat Review on Monday: Closes down as traders await crop ratings

 

 

U.S. wheat futures stumbled lower Monday as some traders sat on the sidelines to wait for more assessments about the condition of the winter wheat crop after a recent hard freeze, analysts said.

 

Chicago Board of Trade May wheat finished 3 1/4 cents lower at US$4.75 1/4 per bushel. Kansas City Board of Trade May wheat ended down 1 3/4 cents at US$4.94, and Minneapolis Grain Exchange May wheat closed down 3 1/2 cents at US$5.15 1/4.

 

Losses came as wheat backpedaled a bit from sharp gains Friday, floor traders said.

 

Wheat futures rallied last week amid expectations the U.S. Department of Agriculture's weekly crop progress report would show a further decline in good-to-excellent ratings. The report is due out at 4 p.m. EDT (2000 GMT) Monday, and traders took a breather before its release, analysts said.

 

It is expected to show a 5- to 10-percentage-point drop in the amount of U.S. winter wheat rated in good-to-excellent condition after a hard freeze last weekend, traders and analysts said.

 

The new ratings will give the markets direction on Tuesday, a CBOT floor trader said.

 

It's already clear that the trade has been "spooked" by early reports of significant damage to the crop, said Jason Britt, broker and analyst at Central State Commodities. If the potential for serious losses wasn't real, the markets would have had a knee-jerk upside reaction last week and then traded sharply lower in a "buy the rumor, sell the fact" scenario, he said.

 

Spillover weakness from CBOT corn also was seen as a negative for CBOT wheat during the day session, a floor trader said. Wheat prices began to firm up as corn trimmed its losses, but corn slipped lower again and added pressure to wheat, he said.

 

In CBOT pit trades, Fimat bought 500 July, and Man Financial bought 400 July. JP Morgan sold 500 December. Funds sold an estimated 500 contracts.

 

Non-commercial speculative traders cut short CBOT wheat futures and options positions and boosted long positions in the week ended April 10, the Commodity Futures Trading Commission said in its supplemental report. The traders decreased shorts by 6,213 lots and lifted longs by 1,839 lots. Speculative traders were net short 30,321 contracts, the CFTC said.

 

In other news, there remain some concerns about global production. Dryness in Australia and Ukraine are beginning to be worrisome, traders said.

 

In Australia, planting season is approaching fast for the next winter wheat crop. Rain is needed through much of this region to replenish soil moisture and irrigation and to recover from long-term drought conditions, DTN Meteorlogix said. Showers during the weekend were mostly confined to the southern West Australia region, according to the weather firm.

 

Major winter wheat areas in the Ukraine, meanwhile, may see some light precipitation during the week but it is also expected to be much cooler, Meteorlogix said.

 

 

Kansas City Board of Trade

 

Moderate volume trading at KCBT was dominated by locals, a floor trader said. Mostly, participants were waiting for the USDA to release the crop progress report, he said.

 

There are ideas the previous progress report did not accurately reflect damage from the freeze because it came out so soon after the event, the trader added.

 

Kansas, the country's top wheat-producing state, had 55% of its crop in good-to-excellent condition as of April 8, down sharply from 77% a week earlier, the USDA said a week ago. Sixteen percent of Kansas' crop was rated very poor-to-poor as of April 8, up from 4% a week earlier.

 

"I think a lot of guys are saying give me a real number," the KCBT floor trader said.

 

Along with the crop progress report, weather will continue to give the wheat markets direction, the trader said.

 

Non-commercial speculative traders decreased short positions by 642 lots and increased longs by 364 lots, according to the CFTC supplemental report. They were net long 17,382 contracts.

 

 

Minneapolis Grain Exchange

 

It was "rather slow" at MGE during the day session, a floor trader said. Losses in the CBOT corn market pressured prices, he added.

 

There were not many inter-market spread trades to speak of, the trader said.

 

"We were just pretty much lower off the bell and didn't really have a chance to rally," he said.

 

Non-commercial speculative traders decreased short positions by 698 lots and increased longs by 492 lots, according to the CFTC. They were net long 13,347 contracts.

 

On Tuesday, the weekly crop progress report should give prices their direction, the trader said.

 

"I think that's going to be the main focus for sure," he said.