May 19, 2007

 

US Wheat Review on Friday: Down sharply on seasonal harvest sell-off

 

 

U.S. wheat futures finished sharply lower Friday as prices got caught in a seasonal slump heading into harvest, traders and analysts said.

 

Chicago Board of Trade July wheat tumbled 14 1/4 cents to US$4.71 1/4, Kansas City Board of Trade July wheat ended down 12 cents at US$4.66 1/2, and Minneapolis Grain Exchange July wheat fell 11 1/2 cents to US$5.00 1/2.

 

There is a seasonal tendency for wheat prices to slide as the markets prepare for supply from the winter wheat crop to come on line, analysts said.

 

"It's so hard to rally wheat historically once you get beyond the 10th or the 15th of May," said Dave Marshall, an independent marketing advisor and commodities broker in Nashville, Ill.

 

Wheat felt some early underlying support from gains in CBOT corn, a CBOT floor trader said. However, corn dipped into negative territory before the close, sending wheat on a track deep into negative territory, he added.

 

Overall, volume was seen as relatively low in the pits and on the screen, traders said. Market participants seemed to shrug off talk that the U.S. could win some export business to India, they noted.

 

U.S. Department of Agriculture Deputy Secretary Chuck Conner met Friday with P.K. Mishra, head of the Agriculture and Cooperation division of India's Agriculture Ministry, capping two days of technical discussions between the countries on improving conditions for wheat trade, according to USDA officials.

 

USDA spokesman Keith Williams said the meeting between Conner and Mishra focused on the same wheat issues addressed Wednesday and Thursday by lower-level officials. The U.S. has long complained that Indian specifications for wheat, particularly a strict near-zero tolerance level for weed seeds, have unfairly kept U.S. exports out of the country's market.

 

Despite the talks, some traders were waiting to see firmer details about possible sales to India before pushing prices up, a CBOT floor broker noted.

 

Also, unless the tender document is altered, it seems too late for wheat of U.S. origin to be offered under a tender issued by State Trading Corp. on behalf of India's government, said a Mumbai-based official for an international trading firm. The tender for up to 1 million tonnes of wheat closes Monday.

 

Ideas about improving global weather conditions also were negative, a CBOT floor trader said. Some good rains of up to two inches fell in eastern Australia wheat-growing provinces of Victoria and New South Wales on Thursday, according to DTN Meteorlogix. The rain had ended by Friday with no notable follow-up rains going into the weekend.

 

West Australia is dry, although its wheat areas have received some rain in the past three weeks, Meteorlogix said. That means the dryness there is not as critical as the situation that was affecting the east prior to this week's rains, the weather firm reported.

 

Looking ahead, traders said they expected wheat to struggle to find solid footing in the absence of upside leadership from CBOT corn.

 

Kansas City Board of Trade

 

KCBT wheat futures saw early strength from some fund buying but turned lower as CBOT wheat and corn weakened, a floor trader said. Some pre-weekend profit-taking and favorable weather conditions were also negative, he added.

 

The DTN Meteorlogix forecast calls for dry, windy and warm weather across all the main U.S. crop areas Friday through the coming weekend. The weather pattern will be beneficial to winter wheat in its filling stages ahead of harvest, the firm said.

 

In pit trades, Fimat bought 400 July and sold 200 July. JP Morgan bought 200 July.

 

Minneapolis Grain Exchange

 

Trading was subdued at the MGE, a floor trader said. Prices followed activity at CBOT and KCBT amid a lack of market-moving news, he added.

 

The U.S. spring wheat crop is doing well so far, which added pressure to prices, the trader said. There also was some inter-market spreading between KCBT and MGE, he said.