May 18, 2007

 

US Wheat Review on Thursday: Slips on harvest, Egypt, improved weather

 

 

U.S. wheat futures tumbled Thursday as a lack of export business from Egypt, the approaching domestic harvest and improving global weather outlooks weighed on prices, analysts said.

 

Chicago Board of Trade July wheat fell 11 1/4 cents to US$4.85 1/2 per bushel, Kansas City Board of Trade July wheat ended down 6 3/4 cents at US$4.78 1/2, and Minneapolis Grain Exchange July wheat closed 9 cents lower at US$5.12.

 

Egypt's state-owned General Authority for Supply Commodities, or GASC, said Thursday it bought 120,000 metric tonnes of Russian and/or Kazakhstan wheat in a tender and none from the U.S. The news was bearish for U.S. wheat futures and encouraged ideas that prices are too high, a CBOT floor trader said. It also sparked fears that Russia would continue to dominate sales to Egypt, he added.

 

Spillover weakness from CBOT corn was another depressant for prices, traders added. Corn is still seen as the leader of the grains, and its losses provided wheat with a pull to the downside, traders said.

 

Wheat prices also have a seasonal tendency to slump going into harvest as farmers prepare to bring the winter wheat crop online, analysts noted.

 

Moving forward, wheat futures will likely struggle as the combines start rolling, especially since the initial harvest reports should be good, one analyst said. The condition of this year's crop is "very good" in Oklahoma and Texas, he said.

 

Improving weather outlooks in key global wheat-growing areas should also continue to be bearish for U.S. wheat futures, a CBOT floor analyst said. Fears about dryness in Australia and the Ukraine are easing somewhat, he said.

 

Showers and thunderstorms promise to bring significant rainfall to eastern Australia wheat areas of New South Wales and Victoria through Saturday, according to DTN Meterologix. Precipitation will range up to one and one-half inches, which is "very good for soil moisture," the weather firm reported.

 

In Ukraine, the next week brings more chances for showers in the west with some soil moisture improvement, although eastern Ukraine will be very warm and dry for at least another week, according to Meteorlogix.

 

In China, meanwhile, a mixed weather pattern is in effect over main crop areas. Wheat grown on the North China Plain remains in the grip of a sustained dry-weather pattern and will continue in that state through the next week, Meteorlogix said. Only isolated thundershowers will develop over the weekend, along with above-normal temperatures, according to the weather firm.

 

Europe continues to have moderate rain showers and improving soil moisture conditions. Analytical report Strategie Grains said the U.S. Department of Agriculture had likely "under-estimated" the size of this season's E.U. wheat crop after dryness in April. As a result, world ending stock levels may not fall as low as recent USDA data suggests, the report said.

 

After adverse April weather, USDA calls for a 2% rise in the crop. While Strategie Grain's has reduced its forecast on the weather, it still looks for a 7% rise in output.

 

Last week, the USDA's first world balance sheet for 2007-08 put world wheat carryout at a 26-year-low of 113.4 million tonnes, which is also a drop of 6% on the year.

 

In other news, private analytical firm Informa Economics on Thursday estimated 2007-08 U.S. all-wheat planted acreage at 60.4 million acres, up from its March estimate of 59.810 million, traders said. The USDA's March estimate for all-wheat plantings was 60.303 million acres, up from 57.344 million planted in 2006.

 

Informa also forecast U.S. 2007 spring wheat planted acreage at 14 million acres, down marginally from the firm's March estimate of 14.001 million, traders added. The USDA's March estimate for spring wheat plantings was 13.808 million, down from 14.899 million planted in 2006.

  

 

Kansas City Board of Trade

  

Weather in the U.S. Southern Plains looks good going into harvest, which is negative for prices, a KCBT floor trader said. Southern Plains wheat areas will have a few showers Thursday in far western locations, followed by generally dry weather from Friday through Sunday, Meteorlogix said. The dry weather has no major heat wave associated with it.

 

"Thus, the general impact of the weather pattern the next few days will be favorable for wheat development and maturation," the weather firm said.

 

The day session was mostly quiet, and pit trades were light, the floor trader said. Country Hedging bought 100 July and 200 December, and sold 200 July. Prudential bought 200 July wheat.

  

 

Minneapolis Grain Exchange

  

MGE followed declines at CBOT and KCBT in slow activity, a floor trader said. Inter-market spreaders were quiet, he added.

 

There is some pressure from good growing conditions for U.S. spring wheat, the trader said.