May 3, 2006

 

US Wheat Review on Tuesday: Higher on declining crop conditions

 

 

U.S. wheat futures rose Tuesday, taking the lead of firmer prices in Kansas City, on declining winter wheat crop conditions, though prices closed off of their highest levels of the day.

 

Basis July contracts, Kansas City Board of Trade wheat settled 6 1/4 cents higher at US$4.44 1/4, Chicago Board of Trade was up 1 1/2 cents to US$3.66 1/2 and the Minneapolis Grain Exchange was up 2 cents to US$4.24 3/4.

 

News that some of the first fields surveyed by the Kansas Hard Red Winter Wheat Tour, sponsored by the Wheat Quality Council, produced better-than-expected average yields took some of the bullish steam out of the market, says Jack Scoville, vice president at Price Futures Group.

 

The market heard reports of averages at 41-45 bushels an acre, which "took the bloom off the rose," he says.

 

"The yields for central Kansas are coming in at or above some of last year's areas, but that's expected to decline as they get further south and into some of the freeze areas and some of the western areas," said Scoville.

 

In addition, weak corn prices and soybeans closing lower created spillover pressure in wheat and took prices off their highs.

 

The day began on a bullish note, however, after market participants had learned that winter wheat crop conditions deteriorated 4 percentage points to 38% poor to very poor in the week to April 30, versus 34% the previous week, the U.S. Department of Agriculture reported. The percentage of the crop in good-to-excellent condition declined to 36%, versus 39% the previous week.

 

Recent rains not covering dry western areas of Kansas and freeze damage reportedly took their toll on the crop.

 

Meanwhile, CBOT funds were even buyers and sellers in wheat, with Man Financial buying 500 July, O'Connor buying 400 July and UBS buying 200 September.

 

Fimat sold a net 500 July and UBS sold 300 July.

 

 

KANSAS CITY BOARD OF TRADE

 

KCBT wheat futures climbed on the decline in crop ratings. While prices closed off their highs, most-active July still gained a respectable 6 1/4 cents, a trader said.

 

Traders will be keying on the weather forecasts, which call for showers and thunderstorms in central and eastern HRW growing areas, but far less rain in the dry western locations. They also will keep their eyes on results coming out of the crop tour.

 

"We'll see whether these wheat yields hold up over the next couple of days as they get a little bit more into Kansas, because I guess they're seeing some of the better stuff today," said Scoville.

 

Tour participants also reported evidence of freeze damage.

 

The tour meets in Colby, Kan., where fields are expected to be in poor condition, Tuesday night to compile the day's results and then will head back across the state toward Wichita on Wednesday.

 

Fimat bought 1,500 July, while Frontier Futures, Man Financial and UBS each bought about 300-400 July. FCStonnee sold 500 December, Man Financial sold 400 July and 400 September and ABN Amro sold 500 July.

 

ADM spread a net 100 May/July contracts at 6 1/2-7 1/2 cents, while Shay Grain spread 200 July/December at 14 cents.

 

 

MINNEAPOLIS GRAIN EXCHANGE

 

MGE wheat closed firmer, with mild support coming from planting delays in North Dakota and spillover gains from the KCBT and CBOT. A trader also cited light spreading among the markets.

 

Forty-two percent of the spring wheat crop had been planted as of Sunday, up from 20% the previous week but down from last year's 58% and down slightly from the 43% five-year average. North Dakota is 32% planted, which equals the five-year average but is behind last year's torrid pace of 50% seeded.

 

The May/July spread settled at 8 3/4 cents, July over.