April 19, 2007

 

US Wheat Review on Wednesday: Closes mixed; late profit-taking at CBOT

 

 

U.S. wheat futures settled mixed Wednesday as late profit-taking at the Chicago Board of Trade dragged prices down from earlier gains, traders said.

 

CBOT May wheat closed 3 cents lower at US$4.74 1/2 per bushel, Kansas City Board of Trade May wheat ended up 1/2 cent at US$4.92 1/2, and Minneapolis Grain Exchange May wheat slipped 2 3/4 cents to US$5.11 1/2.

 

CBOT futures had climbed into positive territory before the close with support from fund buying and ongoing uncertainty about the condition of the U.S. winter wheat crop after a recent cold snap, traders said. The market backpedaled from those gains as late profit-taking set in, they added.

 

It appeared that the unwinding of some short corn, long wheat spreads contributed to declines in CBOT wheat, added Mike Zuzolo, analyst with Risk Management Commodities Inc.

 

In CBOT pit trades, Man Financial and Rosenthal each bought 500 July.

 

Looking ahead, wheat will likely be underpinned by weather problems in European and Australian wheat-growing areas, along with fears about damage to the U.S. crop, Zuzolo said. CBOT May wheat has good support in the next 10 to 15 cents, he said.

 

Planting season is approaching for the next winter wheat crop in Australia, and rain is needed through much of the growing region, according to DTN Meteorlogix. Precipitation is necessary to replenish soil moisture and irrigation and to recover from long-term drought conditions, the weather firm said.

 

A lack of general rainfall is expected across Europe for more than the next five days, keeping wheat fields dry, say forecasters at Cropcast said in a daily report. Europe's dryness issues began in March, with the exception of southern France and Spain, where rain has fallen. Cropcast said the six to 10 day period appears wetter, but conditions could turn drier again in the 11-15 day period.

 

In the U.S, observations of the wheat crop in the Plains and the Delta through Ohio Valley point to extensive damage from the freezing temperatures during the first weekend of April, Meteorlogix said. Indications are that the worst of the damage is in the soft red winter wheat areas of Ohio, Indiana, Illinois, and the northern Delta, the firm said.

 

During the next few days, temperatures will be near to above normal, with some light rain showers in the Plains, according to Meteorlogix. A heavier rainfall system is in store for the Southern Plains during next week, the firm said.

 

This weather pattern will offer the best chance for wheat to recover from the freeze, due to minimal temperature stress and moisture allowing the plants to send out new tillers for production, the firm said.

 

 

Kansas City Board of Trade

 

KCBT felt support from some inter-market spread trading, a floor trader said. Participants were buying KCBT July and selling CBOT July. In pit trades, Man Financial bought 1,200 July and Prudential sold 800 July, he added.

 

Activity was considered relatively slow, the trader said.

 

Price direction on Thursday will come from export sales, he said. Trade expectations call for sales in the range of 200,000 to 400,000 metric tonnes.

 

 

Minneapolis Grain Exchange

 

Fund selling of an estimated 1,000 contracts kept MGE prices under water, even as CBOT rallied prior to the close, a floor trader said. Overall, there did not seem to be a major theme to the day's trading amid a lack of fresh inputs, he added.

 

"I think there's not really much news for the direction we put in," he said. "There's just nothing fresh out here."

 

It's possible that the markets have put in enough weather premium after a recent freeze, but it seems as though there still may be some support from new reports about crop damage, the trader said. Once the crops see more warm weather, injuries will be easier to see, he said.