May 2, 2006

 

US Wheat Review on Monday: Higher on dry west HRW belt concerns

 

 

Wheat futures rose Monday, though prices ended off their strongest levels of the session because of concerns over the hard red winter wheat crop and the lack of significant rains in western Kansas.

 

Basis July contracts, KCBT settled 6 1/2 cents higher at $4.38, CBOT was up 6 1/2 cents at $3.65 and MGE gained 2 1/2 cents to $4.22 3/4.

 

While prices closed higher, profit taking near the session's end took some bullish luster off of the trading day.

 

"We saw a little correction, and we also had some people preparing for a modest increase in the good-to-excellent crop conditions for this afternoon's report," said Dan Basse, president of AgResource in Chicago.

 

"We're starting out at such low levels. When you've got 78 or 79% of the Texas and Oklahoma crop as poor or very poor, it's hard to go down a lot more," he said.

 

Still, Basse said he expects a 1%-2% increase in the good-to-excellent category of the HRW crop, reflecting recent rains in the belt. Last week, 34% of the crop was poor to very poor, the U.S. Department of Agriculture reported.

 

Strength emanated from the outside markets such as crude oil and precious metals, which encouraged speculative buying in the grain markets, sources said.

 

A pullback in corn and soybean prices toward the end of the session, however, also uncovered selling in the wheat pit, Basse said.

 

Meanwhile, export inspections for the week to April 27 rose to 23.375 million bushels, versus 19.291 million the previous week. For the marketing year to date, however, inspections totaled 897.289 million bushels, down from 955.209 million the same time last year.

 

Technically, after the recent decline and approach to oversold levels, July CBOT found support at the $3.51 triple-bottom low area on the charts, and prices bounced from there, an analyst said.

 

At the CBOT, ABN Amro bought a net 2,400 July contracts, J.P. Morgan bought 1,000 July, Fimat bought 800 July, Rand Financial and TradeLink each bought 500 July, and Merrill Lynch and R.J. O'Brien each bought 200 July.

 

O'Connor led the sellers with a net 1,900 July sold, Calyon Financial sold a net 200 and Citigroup Global Markets sold 300 July.

 

Funds bought a net 2,000 wheat contracts as of 1330 EDT.

 

 

KANSAS CITY BOARD OF TRADE

 

KCBT wheat futures climbed to a $4.44 session high but also pulled back a few cents ahead of the closing bell on profit taking and the expected slight increase in HRW crop ratings.

 

All eyes will be on the Wheat Quality Council's Kansas Hard Red Winter Wheat Tour, which kicks off Tuesday in Junction City, for a close-up look at the crop. Tour scouts expect to find overly mature crops in some areas due to a warmer-than-normal winter, with recent freeze damage and drought stress in other areas.

 

Frontier Futures bought 600 July and FCStone bought 400 July. Man Financial sold 1,000 July and Fimat sold 700 July.

 

 

MINNEAPOLIS GRAIN EXCHANGE

 

Most-active July MGE wheat closed moderately higher on spillover gains at the KCBT and the CBOT. In addition, wet weather in eastern areas of the hard red spring growing belt continue to slow plantings, which is supportive for prices.

 

July rose to a $4.39 session high before profit taking eroded part of the gains.

 

Country Hedging sold 400 July, ADM sold 300 July. ADM bought 200 July and UBS bought 150 September, among other scattered buyers.

 

The July/September spread traded out to 5 1/2 cents.