April 27, 2006

 

US Wheat Review on Wednesday: Weak on improved US human rights watch rain forecasts

 

 

U.S. wheat futures ended mostly lower Wednesday as midday U.S. weather forecasts boosted rain chances later this week for key HRW fields after firming early on HRW crop-damage worries due to an overnight freeze in parts of Kansas, brokers said.

 

"This is still a supply-driven market, so any changes in the weather are key," one U.S. wheat trader said. "And the market hasn't been performing that well for the past six days. We seem to be pricing in a 750-million to 800-million bushel HRW crop this year versus earlier expectations for an 800-million-plus bushel HRW crop."

 

Last year's U.S. hard red winter wheat production totaled 930 million bushels, according to the U.S. Department of Agriculture. HRW wheat is used to make bread.

 

"It doesn't look like it's (rain) going to get hit north Colorado and west Nebraska; and in northwestern Kansas it's probably only going to be light showers," said Joel Burgio of DTN Weather, on Wednesday.

 

"But pretty much everyone else - southern Colorado, southern, eastern and central Kansas, Oklahoma and Texas have a good chance for showers and thunderstorms averaging somewhere between 0.3 and 1.75 inches over the next 48 to 72 hours," Burgio said.

 

The rains should start Thursday night and Friday, and end Friday night or early Saturday, DTN's Burgio added.

 

Kansas is the top U.S. winter wheat producer, and its hard red winter wheat crop is especially needed this year as crops in key producers Oklahoma and Texas are in dire straits due to drought.

 

Kansas' U.S. HRW wheat crop is maturing at a faster-than-normal pace this year due to an unusually warm winter, making it susceptible to the cold temperatures and need for rain, noted Ben Handcock, executive vice president of the Wheat Quality Council, on Wednesday.

 

Chicago Board of Trade July wheat ended down 1 3/4 cents at US$3.61 3/4 while CBOT May ended down 1 1/2 cents at US$3.48 1/2 per bushel.

 

Speculative funds sold late after buying 1,000 contracts by noon EDT, brokers said. FC Stonnee bought 400 December, JP Morgan bought 500 July, Citigroup sold 500 July, and O'Connor and Co. sold 700, brokers said.

 

CBOT wheat spread trade was noted ahead of Friday's first notice day for deliveries against May wheat futures. Term Commodities spread 1,000 July/May, Tenco Inc. spread 700 May/July and ADM spread 500 December/September, brokers said.

 

Early support in CBOT soft red winter wheat futures was also seen from Egypt's purchase of 55,000 tonnes of U.S. SRW wheat in addition to 60,000 tonnes of U.S. soft white wheat, brokers noted.

 

In addition, a group of South Korean flour mills are jointly seeking 21,000 metric tonnes of U.S. No. 1 wheat in a tender to be concluded on Thursday, a trader in Seoul said Wednesday.

 

Midday spot U.S. HRW Gulf barge bids rose 4 cents Wednesday while spot SRW Gulf bids fell 2 cents, cash sources said.

 

In a sign of the competitive nature of the global wheat export trade, Russia's wheat exports during March totaled 658,800 metric tonnes, almost doubling on the month and rising 15.3% on the year, according to official customs statistics, Prime-Tass news agency reports.

 

During the first nine months of the 2005-06 marketing year (July-June), Russia exported about 9 million tonnes of wheat, or 70% more than in July-March of 2004-05. Russian wheat exports are at record-high levels, exceeding volumes exported during the same period of 2002-03, when Russia's wheat exports hit a record high of 14.3 million tonnes.

 

Still, CBOT wheat traders said the market was more focused on prospects for Russia's new crop than examining what it was exporting now.

 

In other global wheat news, Ukraine will plant spring wheat on 591,900 hectares in 2006 and not on 614,500 hectares as was forecast previously, the agriculture ministry said Wednesday.

 

India is considering slightly relaxing quality norms for import of wheat, an official said Wednesday. The country plans to import 3.0 million metric tonnes of wheat in addition to the 500,000 tonnes already purchased from Australia's AWB Ltd. (AWB.AU).

 

The Indian federal government bought 8.2 million metric tonnes of wheat from farmers during the April 1-25 period, down from 11.7 million tonnes from last year, government data showed Wednesday. Sources said the lower purchases were evidence of a lack of available grain in the market.

 

In exchange news, the CBOT and the KCBT announced early Wednesday that they would begin simultaneous electronic and open outcry grain markets trading on Aug. 1.

 

 

Kansas City Board of Trade

 

KCBT July hard red winter wheat settled down 5 cents at US$4.45 3/4 after rallying early to a one-week high of US$4.58 per bushel; while KCBT May closed down 3 3/4 cents at US$4.38 3/4.

 

Spot cash 11% through 14% U.S. hard red wheat basis bids were unchanged Wednesday, according to the KCBT.

 

 

Minneapolis Grain Exchange

 

MGE July spring wheat settled down 1 3/4 cents at US$4.27 1/2 while MGE May wheat ended down 2 3/4 cents at US$4.17.

 

"We were busy early on when the market was rallying, with our rally tied to gains in KCBT," one MGE wheat broker said. "There was good country movement on the rally."

 

He noted most of the day's trade consisted of spreads versus KCBT wheat.

 

"There wasn't much commercial trade except for the May/July spread," the broker said. "There could still be some deliveries Friday but talk is of much fewer deliveries now than when the spread was trading at 7 cents to 7 1/2 cents."

 

The May/July spread closed at 10 1/2 cents.

 

Cash spring wheat basis bids were steady to 5 cents higher Wednesday, cash sources said.

 

Merchandisers largely attributed the resurgence this week in basis to the milder weather in the northern Plains, which has drawn farmers to the field and reduced HRS wheat sales into the cash pipeline.

 

"Country selling remains very slow," said Country Hedging analyst John F. Helmstetter.

 

Wednesday's Minneapolis wheat receipts totaled 59 railcars versus last year's 118 railcars. There were 5 durum receipts versus last year's 79 cars.