May 15, 2007

 

US Wheat Review on Monday: Ends up; trims gains before crop report

 

 

U.S. wheat futures finished with modest gains Monday, retracing strong early advances amid nervousness ahead of the release of a weekly crop progress report, analysts said.

 

Chicago Board of Trade July wheat ended up 3 1/2 cents at US$4.96 1/2 per bushel, Kansas City Board of Trade July wheat rose 3 3/4 cents to US$4.80 1/2, and Minneapolis Grain Exchange July wheat settled up 2 1/4 cents at US$5.21 1/4.

 

The session high for CBOT July wheat was US$5.03 1/2, reached as prices climbed along with CBOT soybeans in early trading. Along with spillover support from the soybeans, wheat also felt strength from ongoing concerns about tight global ending stocks, traders said.

 

However, wheat could not sustain the advances ahead of the release of the U.S. Department of Agriculture's weekly crop progress report, analysts said.

 

Trading grew quiet by midday as market participants did not want to "commit to either side" before the report comes out at 3 p.m. CDT (2000 GMT), said Jason Britt, broker and analyst at Central State Commodities. The report will include new condition ratings for U.S. winter wheat and estimates for planting progress of U.S. spring wheat.

 

"I think it's some nervousness," Britt said. "Everybody looks to the 3 o'clock report. That is really probably the main feature" of the session.

 

Condition ratings for U.S. winter wheat are expected to improve slightly in the progress report, analysts said. It looks as though wheat, particularly hard red winter wheat, continues to bounce back after a hard freeze during Easter weekend, they added.

 

"It goes back to wheat being a weed," Britt said, echoing an old trading adage. "It's kind of living up to its name. Never give up on the recuperating ability of wheat."

 

However, one analyst surveyed says he expects to see a drop of one percentage point in good-to-excellent ratings due to heavy rains in the Plains last week. A week ago, the USDA rated 57% of the crop in good-to-excellent condition.

 

The Southern Plains winter wheat areas are in store for some showers in the northern sector of the region, including northern Kansas and southern Nebraska, during the next 24 hours, according to DTN Meteorlogix. In general, however, this week will be drier than the last two weeks, the weather firm said.

 

"This weather pattern is more beneficial for the late-season winter wheat stages," Meteorlogix said. "However, next week brings in renewed rainfall, which could be detrimental to wheat quality, along with encouraging disease development."

 

Higher-than-expected weekly U.S. wheat export inspections, meanwhile, didn't have a major impact on trading, a CBOT floor trader said. The USDA said export inspections for the week ended May 10 were 22.822 million bushels, above trade expectations of 15 million to 21 million. For the year to date, 833.990 million bushels have been inspected for export, below the 925.881 million inspected at the same time last marketing year.

 

Looking forward, trading in wheat futures should be more active Tuesday once participants have new information for the progress report to give them direction, analysts said. CBOT corn also could find direction from the progress report and provide spillover direction to wheat, a floor trader added.

 

In CBOT pit trades, Calyon bought 500 July, while Fimat sold 500 July. Commodity funds bought an estimated 1,000 contracts.

 

Non-commercial speculative traders cut long and short CBOT wheat futures and options positions in the week ended May 8, the Commodity Futures Trading Commission said Friday in a supplemental report. The traders decreased longs by 4,127 lots and shorts by 2,546 lots, and were net short 8,282 contracts.

 

 

Kansas City Board of Trade  

 

Volume was light at KCBT amid a lack of fresh news, a floor trader said. Fimat bought an estimated 1,300 July. There also was some light inter-market trading, with participants buying KCBT July and selling CBOT July, an analyst added.

 

Non-commercial speculative traders trimmed long KCBT wheat positions by 303 lots, lifted shorts by 54 lots, and were net long 9,112 contracts, the CFTC said in another supplemental report.

 

 

Minneapolis Grain Exchange

 

MGE saw a featureless trade, with prices dragged up by gains at CBOT and KCBT, a floor trader said. There were no major players, and floor activity was so slow that locals left around noon, he added.

 

The trade seems to be comfortable with the current price and uneager to make any strong moves, the trader said.

 

"I think we're kind of in our happy place," he said.

 

At the MGE, speculative traders increased longs by 129 lots, cut shorts by 203 lots and were net long 16,341 contracts, according to the CFTC.