May 17, 2006

 

US Wheat Review on Tuesday: Up on Iraq tender news, human rights watch crop worries

 

 

U.S. wheat futures ended higher Tuesday, led by gains in Kansas City Board of Trade hard red winter wheat futures on newswire reports that Iraq had tendered for 1.5 million tonnes of wheat, worries about deteriorating U.S. winter wheat conditions in Nebraska and Colorado and speculative buying, brokers said.

 

Newswires reported Tuesday that Iraq sought 1.5 million tonnes of wheat on a free on board (FOB) basis in a tender that closed on May 9.

 

European traders reportedly expected Australia to garner at least a part of the tender, and noted that Iraq had been interested this week in Australian prices for May shipment.

 

U.S. wheat traders said the U.S. might win some of the business, but that Iraq was key in the export rationing process that will have to take place in 2006-07 due to the short U.S. hard wheat supplies.

 

June 1 is the beginning of the 2006-07 U.S. wheat marketing year, when U.S. hard red winter wheat production is expected to drop to 715 million bushels. In comparison, 2005-06 U.S. HRW production is seen at 930 million bushels.

 

"I think we have better odds for Iraq than India, especially as India is intransigent on quality," one trader said of recent tender news.

 

He suggested that as U.S. hard wheat supplies ran short, new global trading relationships would form, with Australia, Canada and possibly Russia being the key sellers.

 

CBOT July wheat ended Tuesday up 4 cents at US$4.03 1/2 after hitting a high of US$4.04, still below Friday's two-year top of US$4.11.

 

Speculative funds bought about 3,300 CBOT wheat futures contracts, brokers said. Calyon Financial bought about 1,300 July, ABN Amro bought 500 July and Tenco Inc. sold 400 July, brokers noted.

 

CBOT wheat spread trade was active, with Rand Financial's spreading of 2,000 September/July and 1,000 December/July, and Tenco Inc.'s spreading of 500 December/July featured, they noted.

 

The CBOT boosted its wheat and mini-sized wheat futures margin requirements effective with Tuesday's evening session, brokers noted.

 

The new initial/maintenance/hedge margins for CBOT wheat futures are US$743/US$550/US$550 per contract, respectively; the new initial/maintenance/hedge margins for mini-sized CBOT wheat are US$149/US$110/US$110, respectively.

 

There were no changes to CBOT's intra-market wheat spread margins.

 

Midday spot U.S. SRW Gulf barge bids fell 8-10 cents Tuesday following recent heavy farmer sales amid the CBOT rally, cash sources said.

 

"I don't know what we're going to do with all this soft wheat," said one river trader, noting that deliveries at CBOT-monitored terminals were reported at nearly five times higher than week-earlier levels on Monday.

 

Still, CBOT traders worried that recent wet weather in the eastern U.S. Midwest SRW belt would aid the emergence of head scab, a fungus that can develop late in the season.

 

In global wheat news, Japan sought 145,000 tonnes of wheat including 60,000 tonnes of U.S. wheat. Syria canceled a tender to sell 50,000 metric tonnes of wheat due to unacceptable prices.

 

 

Kansas City Board of Trade

 

KCBT July wheat ended Tuesday up 5 1/2 cents at US$4.85 3/4, leaving Friday's contract high of US$4.87 intact.

 

New-crop KCBT December and March wheat set contract highs of US$4.97 and US$5.00 per bushel, respectively.

 

Early gains followed the U.S. Department of Agriculture's report Monday that the amount of Nebraska's winter wheat crop in good to excellent shape fell 11 percentage points last week.

 

Forecasts for hotter temperatures across the U.S. HRW belt later this week for 10-15 days suggested further crop stress.

 

"We've already lost the Texas and Oklahoma crops, the Kansas crop is only 25% in good to excellent shape, and now the Nebraska crop gets hit," one broker said.

 

Kansas' winter wheat crop was 25% in good-to-excellent shape as of Sunday, compared with 23% last week.

 

Overall, the U.S. winter wheat crop was 36% in good-to-excellent condition as of Sunday, up 1 percentage point from last week's rating of 35%, the USDA said.

 

Thirty-eight percent of the U.S. winter wheat crop was in very poor to poor condition, on par with last week's 38%.

 

The crop was 62% headed, up from last year's 55% and the average pace of 55%, with the above-average headed pace in Missouri, Kansas, Texas and Oklahoma showing the crop was advancing rapidly, a telling sign that crop is stressing, said Shawn McCambridge, a grain analyst at Prudential Financial.

 

Spot cash 11% through 15% U.S. hard red wheat basis bids were unchanged Tuesday, according to the KCBT. Spot midday Gulf HRW bids were flat, cash sources said.

 

In winter wheat harvest news, combining in Texas was expected to pick up steam into the weekend.

 

Farther ahead, June weather was expected to be fine for early harvesting, but wet conditions in July could hamper late winter wheat harvest operations, said agricultural forecasters from Earth Satellite's Cropcast in a monthly long-range forecast.

 

 

Minneapolis Grain Exchange

 

MGE July wheat settled up 4 1/4 cents at US$4.59, as Friday's contract high of US$4.67 per bushel remained intact.

 

The USDA reported Monday that 79% of the U.S. spring wheat crop had been planted, behind last year's 88%, but ahead of the five-year average of 72%.

 

North Dakota, the top U.S. spring wheat growing state, was 72% planted, lagging behind last year's 83% pace, but ahead of the five-year average for the state of 62%, according to the USDA.

 

Forty-six percent of the U.S. crop was reported emerged, down from last year's 53% but above the five-year average of 42%.

 

Cash spring wheat basis bids were steady to 15 cents lower Tuesday, cash sources said. Tuesday's Minneapolis wheat receipts totaled 47 railcars versus last year's 187 railcars. There were zero durum receipts versus last year's zero receipts.

 

In its long-range forecast Tuesday, Meteorologist Cropcast said cooler-than-normal temperatures could help limit stress in the U.S. Northern Plains spring wheat belt in the key heading period of July. Some minor yield reductions are likely in drier areas, but most of the spring wheat belt has adequate moisture, Cropcast said.