April 26, 2008

 

US Wheat Review on Friday: Slips on strong world crop expectations

 

 

U.S. wheat futures weakened Friday on expectations for an increase in global production and for improvement in the condition of the domestic crop, analysts said.

 

Chicago Board of Trade July wheat dropped 8 1/2 cents to US$8.15 1/2 per bushel. Kansas City Board of Trade July wheat fell 17 1/2 cents to US$8.51 1/2, and Minneapolis Grain Exchange July wheat shed 9 3/4 cents to US$9.45.

 

The Northern Hemisphere's winter wheat harvest is approaching, and there are bearish ideas the world could harvest a record crop. Producers expanded seedings due to high prices.

 

Trade estimates peg world production at 640 million tonnes to 655 million tonnes, said Bill Tierney, executive vice president of research and marketing for John Stewart & Associates. That would be up from almost 607 million tonnes in 2007-08, according to USDA data.

 

"In general, everyone is keeping their attention on the upcoming world supply," said Terry Reilly, analyst for Citigroup.

 

Wheat futures have tanked since last month, with the CBOT July contract closing down more than US$4.50 from its high of US$12.72 3/4 on March 13. There are ideas the markets are due for a technical bounce after the steep setback.

 

"We've come down a long ways," an analyst said. "Wheat is due for a corrective bounce to ease the oversold conditions."

 

 

Kansas City Board of Trade

 

Recent rains in the U.S. Plains also were beneficial to the hard red winter wheat crop, meteorologists said. There are bearish expectations the U.S. Department of Agriculture will increase its good-to-excellent rating for U.S. winter wheat in Monday's crop progress report, Reilly said.

 

However, there are some background concerns about the potential for a cold snap in the Plains during the weekend. The potential damage to wheat is limited, Cropcast Agricultural Weather said.

 

The only areas that will near damage thresholds will be those wheat areas that are jointing, and lows would need to drop into at least the low 20s Fahrenheit for a few hours to cause damage, Cropcast said. The "closest call" will be in portions of northwestern Kansas and eastern Colorado that will drop into the mid to upper 20s, the private weather firm said.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures were seen as a follower of the other wheat markets, traders said. A lack of fresh, unexpected demand news is keeping the market quiet, they said.

 

The trade will be watching Monday's crop progress report to check on planting progress for spring wheat in the northern Plains. The past week brought precipitation to South Dakota, which may have resulted in some planting delays but also improved soils for future planting and germination, Cropcast said.