April 21, 2007

 

US Wheat Review on Friday: Extends gains on crop worries, weather

 

 

U.S. wheat futures extended their gains Friday amid continued concerns about production losses after a hard freeze and with traders reluctant to sell before new crop condition ratings are released, analysts said.

 

Chicago Board of Trade July wheat climbed 7 cents to US$5.14 3/4 per bushel, a new high close for the contract. Kansas City Board of Trade July wheat ended up 6 cents at US$5.10 1/2, and Minneapolis Grain Exchange July wheat closed 4 1/2 cents higher at US$5.19.

 

Analysts said they expect to see a decrease of another 3-6 percentage points in the amount of U.S. winter wheat rated in good-to-excellent condition when the U.S. Department of Agriculture releases its weekly crop progress report Monday afternoon. The declines will reflect continued assessments of damage from a hard freeze over the Easter weekend, they said.

 

The U.S. Department of Agriculture said 55% of the crop was rated in good-to-excellent condition as of April 15, down from 64% as of April 8 and 77% as of April 1.

 

The cold snap was "pretty severe," said Phil Storer, head of commodities at Dillon Gage. It's not like it knocked (the wheat) down and knocked off a couple bushels an acre. It's dead."

 

Going forward, there may be some pullbacks in prices, although concerns about yield losses should remain supportive for wheat, Storer said.

 

Developing dryness overseas was another friendly factor for prices, analysts said.

 

Planting season is approaching for the next winter wheat crop in Australia, and rain is needed through much of the growing, according to DTN Meteorlogix. Showers are possible during the weekend and next week, but they are expected to be mostly light and mostly in the west and south wheat belt, the weather firm said.

 

Parts of the southwest Ukraine have had rainfall of 0.25-0.75 inches during the past 36 hours, helping to replenish soil moisture for wheat, according Meteorlogix. More rain is needed, but is not likely during the next 10 days, the weather firm said. Also, it will turn colder during the next few days, slowing development of wheat, Meteorlogix said.

 

Potential production shortfalls are especially concerning this year because of tight global stocks, Storer said. "The world is very sensitive to what is going on with wheat everywhere," he said. "We really have got to have a crop this year or we're really in trouble."

 

In CBOT pit trades, Rand Financial bought 800 July, and Iowa Grains bought 400 July. UBS sold 1,000 July, and Fimat sold 800 July. Funds bought an estimated 2,000 contracts.

 

The Commodity Futures Trading Commission Friday afternoon is scheduled to release the commitment of traders report for the period ending April 17.

 

 

Kansas City Board of Trade

 

There was some solid inter-market spreading at KCBT during the day session, the trader added. Participants were selling KCBT July, buying CBOT July and also spreading the other way, he said.

 

Concerns about yield loss from the hard spring freeze were the feature of the day session, a floor trader said.

 

"That's all I've heard about," he said.

 

In Kansas, "a fair amount" of wheat will be ultimately destroyed because of the freeze, said Allan Fritz, a Kansas State University wheat breeder and agronomy professor. The abandoned acres will be planted back with corn, sorghum or soybeans, although Fritz said it was too soon to estimate how many acres would be shifted.

 

Producers will make their decisions based on the extent of freeze, whether the weather encourages wheat to recover, and whether they already forward-contracted their wheat, Fritz said.

 

During the day session, there was also some solid inter-market spreading, the trader added. Participants were selling KCBT July and buying CBOT July and spreading the other way, he said.

 

 

Minneapolis Grain Exchange

 

There are some bullish concerns about getting spring wheat planted in the U.S., Storer said.

 

Dry weather during the day Friday should lead to showers and thunderstorms Friday night and on Saturday, T-Storm Weather said in a forecast. Thunderstorms should also affect eastern South Dakota on Saturday night and Sunday, according to the forecast.

 

Following rainfall in the Northern Plains on Thursday, the weekend precipitation means that at least the eastern two-thirds of the region will have sluggish spring wheat planting and field work through the middle of next week, T-Storm said.

 

"It's just an overall wheat problem," Storer said. "It was the winter wheat first and now it's the spring wheat. It's definitely enough of a problem to keep this (market) supported."

 

MGE saw a mostly light-volume trade during the day session, a floor trader said. There was two-sided inter-market trading, with participants selling MGE December and buying CBOT December. They also bought MGE September and sold CBOT September, he added.

 

MGE futures were watching CBOT and tried to keep up when CBOT took off on the close, the trader said. Trading is volatile, he noted.