May 8, 2007

 

US Wheat Review on Monday: Recovers from losses amid short-covering

 

 

Short-covering ahead of a new government supply and demand report due out Friday helped U.S. wheat futures close mostly higher Monday after suffering earlier losses, analysts said.

 

Chicago Board of Trade July wheat ended down 3/4 cents at US$4.94 per bushel. Kansas City Board of Trade July wheat closed up 1/2 cent at US$4.85 1/2, and Minneapolis Grain Exchange July wheat settled up 2 1/2 cents at US$5.22 1/2.

 

CBOT July wheat hit a session low of US$4.86. However, prices bounced back amid fears the U.S. Department of Agriculture's May supply and demand report will include a lower production number for U.S. winter wheat after an Easter weekend freeze, an analyst said.

 

The report is slated to include production estimates for winter wheat and all wheat, along with estimates for old-crop and new-crop ending stocks.

 

"The market trades fear before fact," the analyst said. "The fact is that the report might come in with a production number for (hard red winter) wheat that is very bullish. Common sense tells you you have to get out of your shorts before Friday's report."

 

Short positions are an expectation of lower prices.

 

Still, there was spillover pressure on wheat during the day session from declines in the neighboring corn market, traders said. CBOT corn futures tumbled on profit-taking and dry weather forecasts that are favorable for planting, they said.

 

The unwinding of some corn/wheat spreads pressed on corn a bit and lent wheat support, traders added.

 

There were some ideas the UDSA on Monday afternoon will increase ratings for U.S. winter wheat in its weekly crop progress report. There could be a 1-2 percentage-point improvement, "just reflecting a little bit of modest recovery from the Easter freeze," a grains analyst said.

 

A CBOT wheat trader said floor chatter suggested condition ratings could improve a bit or stay steady from a week ago. The USDA reported last week that 56% of the U.S. winter wheat crop was in good-to-excellent condition as of April 29, up two percentage points from the previous week and well above the 36% recorded last year.

 

In other news, U.S. wheat export inspections for the week ended May 3 were within expectations and seen as neutral for trading, floor traders said. The USDA said 17.670 million bushels were inspected for export, compared to estimates of 14-21 million.

 

Funds sold an estimated 1,000 contracts. In pit trades, FC Stonnee sold 500 September, and Rand Financial bought 400 July. UBS spread 600 July/December and 400 July/September.

 

Non-commercial speculative traders increased long and short CBOT wheat futures and options position in the week ended May 1, according to the Commodity Futures Trading Commission. Traders lifted longs by 5,393 lots and shorts by 5,475 lots, the CFTC said Friday afternoon in a supplemental report. They were net short 6,701 contracts.

 

 

Kansas City Board of Trade

 

It was a low-volume trading day at the KCBT with spillover selling pressure seen from CBOT corn, a floor trader said. Market participants expect to see a small improvement in the crop condition in Monday's progress report, he added.

 

However, the trade is more focused on the supply/demand report coming out Friday, the trader said. Participants will be keen to see the breakdown between production estimate changes for hard red winter wheat, which is grown in the Plains, and soft red winter wheat, which is grown in the eastern third of the country, he said.

 

At the KCBT, non-commercial speculative traders cut long wheat futures and options positions by 1,323 lots and increased shorts by 3,420 lots, the CFTC said in a supplemental report. They were net long 9,469 contracts.

 

 

Minneapolis Grain Exchange

 

There was some light inter-market trading during quiet activity at MGE, a floor trader said. Participants were buying CBOT, selling MGE and the other way around, he added.

 

There were some supportive ideas that dry weather in the Northern Plains would allow farmers to make planting progress on the spring wheat crop, the trader said.

 

Non-commercial speculative traders increased long MGE wheat positions by 3,091 lots and shorts by 5 lots, according to the CFTC. They were net long 16,009 contracts.