May 4, 2006

 

US Wheat Review on Wednesday: Lower as rain moves through plains

 

 

U.S. wheat futures fell Wednesday as rains move through some central and southern Plains growing areas this week and improve yield potential, sources said.

 

Basis July contracts, KCBT fell 5 1/4 cents to US$4.39, CBOT fell 1 1/2 cents to US$3.65 and MGE was down 2 cents to US$4.22 3/4.

 

"Hill City, Kan., got 2 inches of rain last night, and that's a very dry area in the northwest part of the state. They could really benefit from the rain," said Brian Hoops, senior market analyst and president of Midwest Market Solutions in Yanktonne, S.D.

 

Over the next three days, rain potential of up to 1 1/2 inches is seen in south-central and eastern Kansas, central and eastern Oklahoma and north-central and eastern Texas. Areas from central and southwestern Kansas through the Oklahoma and Texas panhandles, however, will see no more than 0.50 inch, according to DTN Meteorlogix.

 

But with conditions extremely dry in many areas, any rain is welcome and is seen benefiting the crop even in the latter stages of development, a trader said. In fact, a crop specialist on the Kansas Hard Red Winter Wheat Tour, sponsored by the Wheat Quality Council, said after the first day that many fields could be turned around if rains fall within the next 10 days.

 

Futures losses were moderate, however, as the commodity funds were mostly light sellers on the day.

 

"There wasn't much of anything going on in the wheat," from a fund standpoint, said Hoops, while corn saw heavy fund sales of around 6,000 contracts as of 1330 EDT.

 

The wheat market began the day with a small rally on overnight news that the crop tour pegged the first day's average production at 40.8 bushels per acre, versus 48.9 bushels on the first leg of the 2005 tour. The estimate was based on 210 field surveys.

 

The rally was short-lived, however, and prices fell as traders focused more on the upcoming rains and the potential for crop regeneration in some areas.

 

At the CBOT, Fimat sold 300 July and Goldenberg Hehmeyer sold 100 July. UBS bought 500 July, while J.P. Morgan, Rand Financial and D.T. Trading each bought 200 July. R.J. O'Brien bought 100 July.

 

 

KANSAS CITY BOARD OF TRADE

 

KCBT wheat futures closed lower on the rainy weather and the potential for it to improve yields in upcoming days. Volume was low and activity was subdued, however.

 

Crop tour participants found average yields from around 31 bushels an acre up to 45 bushels, as the caravan left Colby, Kan., Wednesday morning and headed toward Wichita for the evening conference where officials will total the data and come up with an average for day two. The final leg of the tour will leave Wichita Thursday morning and will end at the KCBT to issue to final results.

 

The tour also found much evidence of freeze damage and drought-stressed crops.

 

Frontier Futures sold 600 July, Refco sold 300 July, Prudential Financial bought 300 July, while UBS bought and sold 300 July.

 

 

MINNEAPOLIS GRAIN EXCHANGE

 

MGE wheat futures closed lower in sympathy with declines in Chicago and Kansas City and as prices set back a bit from recent highs in light trade.

 

Wet weather in North Dakota is slowing the hard red spring planting effort, after a fast start to the season on higher-than-normal temperatures, although last week's pace was in line with the five-year average.

 

"I don't think we're doing too bad right now," a trader said.

 

ADM bought 200 July, UBS bought 100 July, while Country Hedging sold 100 July and 100 September.