May 16, 2006

 

US Wheat Review on Monday: Lower on profit-taking, metals, dollar

 

 

U.S. wheat futures ended lower Monday following weak precious metal futures, dollar strength and profit-taking after Friday's contract highs in U.S. wheat futures on the U.S. Department of Agriculture's global and U.S. wheat ending stocks and U.S. production data, brokers said.

 

Weekly U.S. wheat export inspections of 14.677 million bushels matched estimates, while overnight U.S. wheat export sales were quiet, they noted.

 

Talk of an early hard red winter wheat harvest - during the last half of May due to the advanced nature of the crop this year - weighed on Kansas City Board of Trade wheat, while traders thought Monday's weekly USDA winter wheat crop rating would show unchanged conditions to a slight improvement due to rains about a weak ago.

 

The USDA said last Monday that only 35% of the U.S. winter wheat crop was in good to excellent shape, a slight deterioration from the previous week following this year's drought and some late freeze damage in Kansas.

 

Chicago Board of Trade July wheat ended down 2 cents at US$3.99 1/2 per bushel in a setback from Friday's 2-year top of US$4.11.

 

Calyon Financial bought 1,500 July, while Fimat sold a net 1,500 July due to a late sale of that many contracts. ABN Amro bought 1,000 July; the Refco division of Man Financial bought a net 600 July; and Man Financial bought 700 July, brokers said.

 

Opinions were mixed as to the net daily trade of speculative funds, sources said.

 

One broker thought funds bought about 1,000 CBOT wheat futures on Monday; another thought funds sold about 1,000 lots; and a third source thought funds bought about 1,800 CBOT wheat futures.

 

"It's a little difficult to determine precisely what is a fund and what is a commercial," one broker said.

 

CBOT wheat options trade quieted from last week's hectic pace. Rosenthal Collins sold 1,000 July US$3.60 puts early.

 

CBOT wheat spread trade was moderate. Fimat spread 500 September/July and Tenco Inc. spread 500 December/July, they noted.

 

Midday spot U.S. HRW and SRW Gulf barge bids were unchanged Monday, cash sources said.

 

In global wheat news, the USDA said Monday in its "Wheat: World Markets and Trade" report posted on the Foreign Agricultural Service Web site that world wheat supplies would tighten in 2006/07 as production falls for the second consecutive year. However, global consumption was also projected to decline (from last year's record), as a result of less animal feeding, the government said.

 

"Europe and the former Soviet Union typically account for 75% of world wheat feeding, and with short crops in many countries in these regions, demand will likely shift to greater coarse grains use," the USDA said.

 

In the Southern Hemisphere, the Buenos Aires Cereals Exchange forecast Monday that Argentine farmers would increase wheat plantings by 15% this year amid improved growing conditions.

 

Last year, a long drought cut wheat plantings to 5.08 million hectares, compared with 6.09 million the previous year. Farmers had planted about 6% of the projected area as of Saturday, the exchange said.

 

Moreover, Argentine farmers had sold 5.87 million metric tonnes of 2005-06 wheat, the latest Agriculture Secretariat data showed. By this time last year, Argentina had sold 8.7 million tonnes of 2004-05 wheat.

 

 

Kansas City Board of Trade

 

KCBT July wheat settled down 1 cent at US$4.80 1/4, also in a retreat from Friday's contract high of US$4.87.

 

However, KCBT July wheat closed just 3/4 cent off the day's high, a technically supportive feature, one technical trader said.

 

"If the market takes out Friday's (contract) high of US$4.87, the next target appears to be US$5.00 per bushel," he said.

 

The 9-day Relative Strength Index for July ended at 73, above the overbought level of 70.

 

Fimat was an early buyer of a net 80 July while ADM sold 200 July and 100 December early, brokers noted.

 

Trade of July/September was also noted, while there were 586 redeliveries of KCBT wheat against expired May futures, the exchange said. A customer of Man Financial posted 231 lots and a customer of Shay Grain posted 221 lots. The Term Commodities house account stopped 504 lots.

 

The last day to deliver against May wheat is May 23.

 

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

 

 

Minneapolis Grain Exchange

 

MGE July wheat ended down 4 1/2 cents at US$4.54 3/4 after setting a contract high Friday of US$4.67 per bushel.

 

Cash spring wheat basis bids were mixed Monday, with bids ranging from 20 cents higher to 5 cents lower, cash sources said.

 

Monday's Minneapolis wheat receipts totaled 146 railcars versus last year's 58 railcars. There were 32 durum receipts versus last year's 37 cars.