April 18, 2007

 

US Wheat Review on Tuesday: Mixed after opening sharply higher

 

 

U.S. wheat futures settled mixed Tuesday, retreating from strong opening advances fueled by concerns about freeze damage to the winter wheat crop, traders said.

 

Chicago Board of Trade May wheat rose 2 1/4 cents to US$4.77 1/2 per bushel. Kansas City Board of Trade May wheat ended down 2 cents at US$4.92, and Minneapolis Grain Exchange May wheat ended down 1 cent at US$5.14 1/4.

 

The session high for CBOT May wheat was US$4.89.

 

Nearby CBOT wheat futures managed to hold on to gains with support from ideas that some soft red winter wheat acres may be shifted into corn because of their poor growing condition, analysts said. Weekly crop progress ratings for some SRW states showed "amazing" declines after a recent hard freeze, they added.

 

In Arkansas, the crop was rated 28% good to excellent in the week ended April 15 versus 54% the previous week, according to the U.S. Department of Agriculture crop progress report released Monday afternoon. Missouri's crop was rated 10% in good-to-excellent condition, compared with 46% a week earlier.

 

Losses in the CBOT corn market, however, seemed to drag on wheat, said Doug Houghtonne, market analyst with Brock Associates.

 

"The corn market is an anchor," he said.

 

The trade also had anticipated "a good extent" of the condition ratings declines, Houghtonne added. Still, the weather will remain a key factor in market movements, he said.

 

Inter-market fund spreading, with funds buying CBOT and selling KCBT, also was a feature, floor traders said. Funds bought an estimated 2,000 contracts at CBOT and sold an estimated 2,000 contracts at KCBT.

 

Trading was volatile. In CBOT pit trades, Citigroup sold 500 July, while FC Stonnee sold 400 May. JP Morgan, Fimat and Man Financial each sold 400 July. JP Morgan spread 2,000 May/July, and Man Financial spread 1,000 July/Dec.

 

Along with concerns about the U.S. winter wheat crop, there are also early worries about potential international production problems, analysts said. Dry weather continues to keep soil moisture at a minimum for developing wheat in Ukraine, and dry conditions are prominent in Australia ahead of planting the next winter wheat crop, DTN Meteorlogix said. Neither of these areas has significant precipitation in the forecast during the balance of this week, the weather firm said.

 

 

Kansas City Board of Trade

 

Heavy fund selling and profit-taking weighed on prices, a KCBT floor trader said. Some technical damage was likely inflicted on KCBT wheat as the market opened sharply higher and then closed lower, he added.

 

"It's just an extremely volatile market," an analyst said.

 

There are some ideas that the market is due for a correction after sharp gains, the trader said. However, some reports are still coming in about freeze damage in the fields, he said.

 

"We're still getting reports from the country about losses or damage from the freeze," he said. "I think we could still see support" from the damage.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures were seen as a follower, a floor trader said. Declines in the CBOT corn market weighed on prices, he said.

 

Trading is expected to remain choppy amid tight ending stocks and ongoing production concerns, the trader added.