April 19, 2006

 

US Wheat Review on Tuesday: Market rebounds on crop ratings, weather

 

 

U.S. wheat futures rebounded from recent sharp losses to settle higher to sharply higher Tuesday, with Kansas City and Minneapolis leading the gains amid crop concerns and planting delays, sources said.

 

Basis May contracts, Chicago Board of Trade wheat settled 5 1/2 cents higher at US$3.55 a bushel, Kansas City Board of Trade rose 14 3/4 cents to US$4.52 1/2 and Minneapolis Grain Exchange wheat gained 11 3/4 cents to US$4.25 1/2.

 

Most market participants agreed that Monday's sharp losses were overdone and prices were due for a correction, though strong fundamental support from lower hard red winter crop ratings, dry weather and planting delays in the northern Plains continue to be seen.

 

"We've had some real hot weather at the beginning of this week in the southern Plains and there's not much rain in the outlook for this week," said Bill Nelson, associate vice president at AG Edwards in Chicago.

 

And while there is some rain on the forecast maps for next week, no major rain events are seen, sources said.

 

Overall, "there was a rush of bearish sentiment yesterday" on forecasts that showed promising rains in the six- to 10-day outlook, which was overshadowed Tuesday by the realization that there is still "a desperate crop down there" in the southern Plains, said Nelson.

 

The U.S. HRW crop declined by 2 percentage points to 39% good to excellent in the week to April 16, from 41% the previous week, the U.S. Department of Agriculture said Monday afternoon. While the decline was expected, it nevertheless provided price support.

 

Wheat's gains were less prominent in Chicago, where large funds were net sellers of 600 contracts as of 1330 EDT, with light spreading activity also noted.

 

The soft red winter crop, traded at the CBOT, remains in good shape, supported by beneficial moisture and warm temperatures that have spurred development.

 

At the CBOT, Rand Financial bought 200 July. Calyon Financial sold 800 July, Goldenberg Hehmeyer sold a net 300 July, Tenco sold 200 July and J.P. Morgan sold 200 September.

 

ADM spread 500 December/July contracts.

 

 

KANSAS CITY BOARD OF TRADE

 

The largest gains were seen at the KCBT, where the crop concerns are most prevalent and where prices were oversold on Monday, prompting a rebound.

 

Weather forecasts showing spotty rains and/or light coverage this week and into next week provided additional incentive to buy, traders said.

 

KCBT May wheat traded to a US$4.53 high and settled just beneath that level at US$4.52 1/2 for a strong 14 3/4-cents gain on the day.

 

Country Hedging bought a net 200 July, Frontier Futures bought a net 100 May and 100 July, ABN Amro bought 800 September, Refco bought a net 100 July and UBS bought 400 December.

 

Benson Quinn sold a net 300 May and 200 July, Man Financial sold a net 100 July, Prudential Financial sold a net 600 July and UBS sold a net 100 July and 200 September.

 

 

MINNEAPOLIS GRAIN EXCHANGE

 

MGE wheat futures also made solid gains as prices benefited from concerns over the hard red spring planting pace, which was reported at 10% complete, up from 4% the previous week but lagging the 21% pace from last year and the 16% five-year average.

 

Fieldwork and planting has been slowed by flooding, wet and snowy conditions in North Dakota this spring, sources said.

 

MGE May, despite trading in a wide range, was still held to an inside day on the charts, meaning the high and low was within the previous day's range.

 

Prices traded through technical resistance at the 10-day and 40-day moving averages on the way up, which attracted more buying, a trader said.