May 9, 2008

 

US Wheat Review on Thursday: Strengthens on speculative buying, follows corn

 

 

U.S. wheat futures finished higher Thursday, as speculative buyers chased higher corn prices into the wheat markets.

 

Chicago Board of Trade July wheat added 14 1/2 cents to US$8.22 a bushel. Kansas City Board of Trade July wheat added 10 1/4 to US$8.68, and Minneapolis Grain Exchange July wheat rose 32 cents to US$10.03 1/4.

 

But the market's most active contracts fell back from the day's highs, and a CBOT pit trader said, "It's not a big close." "Encouraging" export sales figures released Thursday by the U.S. Department of Agriculture may have also provided some market support, said John Kleist, a broker/analyst at Allendale. The USDA on Thursday reported wheat sales at 491,700 metric tonnes for the week ended May 1. Analysts expected the sales figure to range between 250,000-500,000 metric tonnes.

 

"The drop in prices did stimulate demand, just like the rise in corn prices rationed demand," Kleist said.

 

But, he added, the upside for wheat prices is limited.

 

Traders expect confirmation of a predicted record in world wheat production when the USDA releases its world supply and demand report at 8:30 a.m. EDT Friday.

 

The consensus estimate for 2008-09 ending inventories of corn is 700 million bushels, with ending inventory expectations for wheat at 425 million bushels and soybeans at 275 million bushels, according to a Citi research note. Citi analyst David Driscoll predicts "better conditions for wheat and soy, while corn remains tight."

 

Driscoll said the USDA report "will contain a lot of moving parts subject to revision," but ultimately he sees "corn and soy prices trading flat, with perhaps modest downward pricing pressure in store for wheat prices."

 

Commodity funds bought an estimated 4,000 contracts at the CBOT.

 

 

Kansas City Board of Trade

 

The 2008 Kansas hard red winter wheat crop is expected to have an average production of 379.1 million bushels, according to figures released Thursday from the Wheat Quality Council's annual hard winter wheat tour.

 

The average of tour participants' estimates for yield is 43.3 bushels an acre.

 

The tour's estimate is up from last year, when the state produced 283.2 million bushels according to the U.S. Department of Agriculture, as freeze damage became more apparent and because of wet weather at harvest time.

 

Jim Shroyer, an agronomist with Kansas State University said in a radio interview Thursday that Kansas has "a good, average (wheat) crop at this particular stage."

 

 

Minneapolis Grain Exchange

 

MGE spring wheat futures should continue to follow the other wheat markets, said Brian Henry of Archer Financial Services.

 

The focus will be on the maturation of the soft red wheat and HRW wheat crops, which remain in relatively good condition, Henry said in a research note.

 

"Prospects for spring wheat production remain positive, but the crop has a long way to go," the analyst added.

 

Spring wheat plantings remain on pace and most areas are finding enough moisture to get the crop germinated, he said. Cool temperatures have helped the dry conditions, but hindered development as emergence is slow, and a small shift in spring wheat acres to row crops has occurred over the last few weeks, Henry said.