May 13, 2006

 

US Wheat Review on Friday: Up after contract highs on USDA, funds

 

 

U.S. wheat futures ended higher Friday, but below the day's new contract highs, on speculative buying after the USDA forecast a year-over-year drop in U.S. 2006 winter and all-wheat production and ending stocks and a year-over-year decline in 2006 global wheat production, brokers said.

 

USDA's estimate for new crop 2006 U.S. wheat production at 1.873 billion bushels was 76 million bushels below the trade average and below estimated 2005-06 U.S. wheat production of 2.105 billion bushels.

 

The USDA estimated all-winter wheat production at 1.323 billion bushels in 2006-07, lower than the 1.499 billion bushels produced in 2005-06, and 50 million bushels below the 1.373 billion bushels average analyst estimate.

 

The USDA also estimated bullish 2006 U.S. hard red winter wheat production of 715 million bushels, well below the previous year's 930 million bushels after drought slashed the U.S. Southern Plains' crop.

 

Top producer Kansas' 2006 winter wheat crop was estimated at 319.6 million bushels, just above last week's Wheat Quality Council estimate of 319.22 million bushels.

 

U.S. 2006 wheat ending stocks were seen at 447 million bushels, down from the latest prediction of 547 million bushels for 2005-06.

 

World wheat ending stocks for 2006-07 were seen at 128.1 million metric tonnes, down from an estimated 143.7 million tonnes for 2005-06.

 

Moreover, wheat found support from the USDA's forecast that 2006-07 U.S. corn ending stocks would be nearly 50% less than the current crop year stocks due to increased ethanol usage and lower estimated production.

 

CBOT July wheat ended up 9 1/2 cents at US$4.01 1/2 after setting a contract high of US$4.11 per bushel.

 

Commodity funds bought about 15,000 lots despite the USDA's forecast of a year-over-year increase in U.S. SRW production. Funds were aggressive buyers of CBOT wheat all week following early-week gains in precious metals and energy futures, sources said.

 

"We traded (earlier Friday) US$1 per bushel higher than last year in the July (wheat) contract despite the production increase," one CBOT wheat trader noted. "This is a funny market."

 

CBOT July wheat settled last year (May 12, 2005) at US$3.02 3/4 per bushel. U.S. 2005 SRW production was estimated at 309 million bushels while the 2006 U.S. SRW crop is seen at 356.2 million bushels.

 

Meanwhile, the three U.S. May wheat futures contracts expired at midday Friday,and the last day to deliver against the May wheat contracts is May 23.

 

CBOT May wheat expired up 11 1/2 cents at US$3.94; KCBT May wheat expired up 9 cents at US$4.75; and MGE May wheat expired up 4 cents at US$4.52 per bushel.

 

Midday spot U.S. HRW Gulf barge bids fell 3 cents Friday while spot SRW bids were unchanged, cash sources said.

 

Traders said there was little news of possible Iraqi wheat business but noted India's State Trading Corp., or STC, (512531.BY) changed details in its 3 million tonne wheat tender, including the reduction in the performance bank guarantee to 5%, from the earlier stipulated 10% of the value of the contract and sampling details, sources said.

 

The tender closes May 18.

 

In other global wheat news, European wheat prices rose Friday on the bullish USDA crop estimates.

 

French spot standard wheat rose to EUR107 a metric tonne, up EUR1 on the day, a rise of EUR3 since the beginning of the week. New crop prices for September-December rose to EUR112/tonne, up EUR1 on the day.

 

 

Kansas City Board of Trade

 

KCBT July wheat settled up 9 3/4 cents at US$4.81 1/4 after setting a new high of US$4.87.

 

The 9-day relative strength index for KCBT July is 74, above the overbought level of 70

 

Spot cash 11% through 14% U.S. hard red wheat basis bids were unchanged Friday, according to the KCBT.

 

 

Minneapolis Grain Exchange

 

MGE July wheat closed up 9 cents at US$4.59 1/4 after setting a contract high of US$4.67 per bushel.

 

Cash spring wheat basis bids were steady to higher Friday, cash sources said. Friday's Minneapolis wheat receipts totaled 49 railcars versus last year's 205 railcars. There were 14 durum receipts versus last year's 41 cars.