May 5, 2006

 

US Wheat Review on Thursday: Mostly lower ahead of crop tour results

 

 

U.S. wheat futures closed mostly lower Thursday on conflicting fundamentals, but prices mostly followed the bearish trend at the Chicago Board of Trade as participants waited to see results from the hard red winter tour.

 

Chicago corn and soybean futures also closed lower on fund selling.

 

Basis the most-active July contracts, Kansas City Board of Trade wheat settled 1/2 cent lower at US$4.38 1/2, CBOT was down 2 1/2 cents to US$3.62 1/2 and Minneapolis Grain Exchange wheat was down 3/4 cent to US$4.22.

 

The bearish theme in the market centered on rains falling on key wheat-growing areas of the southern Plains and Kansas, sources said.

 

"There's rain in the forecast for the southwest winter wheat belt, and the results from the crop tour are not coming back as horrific as we had expected," said Vic Lespinasse, floor broker and analyst at A.G. Edwards in Chicago.

 

Episodes of scattered showers and thunderstorms are expected over the southern belt Thursday through Saturday, with rains averaging 0.50-1.50 inches and locally heavier amounts in southeastern Kansas, central and eastern Oklahoma and north-central and northeastern Texas, DTN Meteorlogix said. Rains are seen averaging 0.10-0.50 inch in the Oklahoma and Texas panhandles, southeastern Colorado and southwestern and south-central Kansas.

 

Sunday is expected to be mostly dry over the southern Plains, with a chance for sprinkles and light rain Monday into Tuesday.

 

"Wheat is like a cat. It has nine lives and it comes back repeatedly. Now we're waiting to see what the results from the tour are," said Lespinasse.

 

The Kansas Hard Red Winter Wheat Tour estimated the Kansas crop at 319.2 million bushels, down from 380 million produced last year, with an average yield of 37.3 bushels an acre.

 

The tour ran from Tuesday through Thursday and was sponsored by the Wheat Quality Council.

 

There was speculation among traders this week that the Kansas crop would total 325-350 million bushels, so the estimate was below even some of the lowest trade guesses.

 

The Oklahoma HRW crop was estimated at 67 million bushels, down from 128 million last year, due to severe drought stress.

 

Meanwhile, news that Iraq canceled 100,000 tonnes of U.S. HRW wheat was not welcome news for market bulls, though Iraq's Grain Board is expected to tender within a week for wheat on the international market, sources said.

 

Iraq needs approximately 3 million metric tonnes of wheat per year to meet its food needs.

 

India is expected to tender for up to 3 million tonnes of wheat, though Lespinasse said he doesn't expect the U.S. "to get much of that business."

 

Weekly export sales were better than expected at 388,800 tonnes for the 2005-06 crop, and provided light price support, while 185,500 tonnes were sold from the 2006-07 crop. Shipments totaled 606,200 tonnes, up 17% from the previous week.

 

At the CBOT, J.P. Morgan and UBS each sold 500 July and Iowa Grain sold 200 July. Refco sold 500 July, Rosenthal Collins sold 300 July and Fimat sold a net 200 July.

 

Funds sold a net 200 wheat contracts in a slow trading day.

 

 

KANSAS CITY BOARD OF TRADE

 

KCBT wheat futures closed narrowly mixed but were weak for most of the session on the rainy forecasts improving the HRW crop's yield potential.

 

The July contract topped out at an early high of US$4.41 and weakened from there, though prices were held to a fairly small range. This area coincides with minor moving average resistance and may have prevented prices from rising.

 

ABN Amro sold a net 200 July, ADM bought a net 100 July, Frontier Futures bought 350 July, FCStonnee bought 200 July, Fimat bought 200 September, Prudential Financial bought and sold 200 July and UBS bought 500 July.

 

 

MINNEAPOLIS GRAIN EXCHANGE

 

MGE wheat futures closed slightly lower, following the bearish trend in the other markets, though the nearby May managed to gain 5 cents in extremely light trade.

 

There are mild concerns in the market over wet weather possibly delaying plantings, but with most of May to get the spring wheat crop in the ground there is still plenty of time, a trader said.

 

Prudential Financial bought 100 December and sold 100 July, Country Hedging sold 100 July, ADM bought 300 July and 100 September and sold 100 December and J.P. Morgan bought 100 July.