May 9, 2007

 

US Wheat Review on Tuesday: Slides on corn, crop condition ideas

 

 

U.S. wheat futures sagged Tuesday under pressure from steep declines in the neighboring corn market and amid ideas that winter wheat crop condition ratings are holding up well, traders and analysts said.

 

It is also typical for wheat futures to falter approaching the harvest, an analyst added.

 

Chicago Board of Trade July wheat closed down 13 cents at US$4.81 per bushel. Kansas City Board of Trade July wheat slipped 9 1/2 cents to US$4.76, and Minneapolis Grain Exchange July wheat finished 12 3/4 cents lower at US$5.09 3/4.

 

The U.S. Department of Agriculture's weekly crop progress report, released Monday afternoon, rated 57% of the U.S. winter wheat crop in good-to-excellent condition as of May 6, up one percentage point from a week earlier and well above the five-year average of 35%. The ratings have bounced back a bit after falling on initial reports of severe damage from an early April freeze.

 

In soft red wheat-producing states, Illinois' crop was rated 26% in good-to-excellent condition as of May 6, compared with 25% the previous week; Arkansas' crop was rated 16% good to excellent, versus 15% last week; Indiana's crop was rated 37% good to excellent, up from last week's 34% rating; and Missouri's crop was 9% in good-to-excellent condition compared with 5% last week, according to the USDA. SRW wheat is baked into cakes and snack foods.

 

"The crop is not as bad as what they thought it was going to be two to three weeks ago," said Dan Zwicker, senior analyst with AgriVisor Services. "Your ratings are holding up. Overall, rating levels are still really strong to suggest a big crop."

 

Funds sold an estimated 3,000 contracts at CBOT, while commercials bought about 2,000 contracts. In pit trades, JP Morgan bought 800 July, and Fimat bought 700 July. Man Financial bought 400 July and sold 300 July. Rand Financial sold 400 July.

 

Seasonal declines in wheat are typical this time of year, Zwicker noted.

 

"It's just real tough to get the wheat market to do anything but drift downward as harvest approaches," he said.

 

CBOT corn also ended with steep losses, and spillover selling shoved wheat into negative territory, floor traders said.

 

 

Kansas City Board of Trade

 

KCBT felt light underlying support from a "surprising" decline in Kansas' weekly condition rating, a floor trader said. The nation's largest hard red winter wheat-producing state had 37% of its crop rated in good-to-excellent condition, down from the 39% reported last week.

 

Still, the heavy losses in CBOT corn pulled wheat deep into negative territory, he said.

 

 

Minneapolis Grain Exchange

 

Traders said market participants are looking ahead to Friday's scheduled release of a supply/demand report from the USDA. The report, due at 8:30 a.m. EDT, will include new ending stocks estimates for old- and new-crop U.S. wheat, along with estimates for 2007 all wheat and winter wheat production.

 

A Dow Jones Newswires survey of analysts showed the average estimate for 2006-07 wheat ending stocks is 424 million bushels, compared to the USDA's April estimate of 422 million. The average analyst estimate for 2007-08 ending stocks is 500 million.

 

The average analyst estimate for all wheat production is 2.158 billion bushels, up from 2006 production of 1.812 billion. The average analyst estimate for all winter wheat is 1.587 billion, up from 1.298 billion in 2006.