May 22, 2007

 

US Wheat Review on Monday: Rebound, spillover support boosts prices

 

 

U.S. wheat futures closed near session highs Monday on the back of gains in neighboring markets and in a rebound from recent losses, traders and market analysts said.

 

Chicago Board of Trade July wheat ended up 8 1/4 cents at US$4.79 1/2. Kansas City Board of Trade July wheat rose 8 cents higher to US$4.74 1/2, and Minneapolis Grain Exchange July wheat finished 4 3/4 cents higher at US$5.05 1/4.

 

Wheat futures felt spillover support from advances in the CBOT corn and soybean markets throughout the day session, analysts said. Activity was mostly quiet as the trade looked to the other markets for direction, they added.

 

Prices also were due for a bit of a bounce after heavy losses last week, said Chad Henderson, analyst for Prime Agricultural Consultants. CBOT July wheat, for example, fell 11 1/4 cents Thursday and 14 1/4 cents Friday.

 

"After last week's bloodbath, it was a little bit oversold," Henderson said about wheat. "We can bounce from there."

 

In pit trades, Fimat bought 300 July, and Man Financial sold 500 July.

 

Weekly U.S. wheat export inspections also were solid and seen as friendly to prices, traders noted. The USDA said inspections for the week ended May 17 were 22.190 million bushels, above expectations of 16 to 21 million bushels.

 

Looking at global production potential, traders said there remain concerns about dryness in certain areas, including Europe and the Ukraine, although the anxiety is not new.

 

Scattered showers occurred in the western sector of Ukraine over the weekend, but most of this week will be dry and quite warm in central and eastern parts of the country, according to DTN Meteorlogix. Temperatures will range from 85 to 95 degrees Fahrenheit, which stresses winter wheat, Meteorlogix said.

 

This week also features a mostly dry weather pattern in Australia, Meteorlogix said. The only sector of the country in line for showers will be West Australia, with light showers in store between Monday and Wednesday, the firm reported.

 

"Critically low soil moisture has eased due to recent rains, but additional moisture is needed to assure a good start to the winter wheat crop," Meteorlogix said.

 

In central China, the North China Plain has some showers in store during two separate periods this week. Moisture will concentrate in Hebei and Shandong provinces with up to three-quarters of an inch in precipitation, Meteorlogix said. Henan province, which has been very dry, will remain dry this week, according to the weather firm.

 

Looking ahead, Henderson said CBOT corn and beans will have to trade firmer this week in order for wheat to stay strong. There is a seasonal tendency for wheat prices to slump as harvest of the U.S. winter wheat crop begins, analysts said.

 

"If corn and beans go up, wheat can maybe hold together," Henderson said.

 

U.S. winter wheat good-to-excellent condition ratings are expected to stay steady or rise as much as two percentage points in the USDA's weekly crop progress report, traders and analysts said. A week ago, the UDSA rated 58% of the U.S. winter wheat crop in good-to-excellent condition.

 

 

Kansas City Board of Trade

  

KCBT wheat futures bounced higher after losses last week and with support from gains at CBOT, a floor trader said. In pit trades, Fimat bought 300 July and sold 50 July.

 

Seasonal harvest pressure is present but was overruled by spillover support from corn and the rebound from last week's declines, the trader added.

 

Although hampered by persistent spring rains, the Texas Agricultural Statistics Service said 1% of Texas' HRW wheat crop had been harvested as of last week, with extension officials noting that combines were largely concentrating their early efforts on ripening acreage in the Coastal Bend area of southern Texas. Early reports of wheat yields have been "very good," according to a weekly crop report provided by Texas A&M University.

 

In Oklahoma, the first load of new crop wheat was delivered in Oklahoma on Wednesday, said Oklahoma State University agricultural economist Kim Anderson. Initial deliveries carried 14% moisture content and a 60-pound per bushel test weight, denoting generally average levels of quality, he added.

 

Wheat in Oklahoma counties that border Texas is ready to cut, but conditions need to dry up a little as the plants are wet and fields are muddy, said Mark Hodges, executive director of the Oklahoma Wheat Commission.

 

 

Minneapolis Grain Exchange

  

MGE saw a "really quiet, light volume" trade, a floor trader said. Advances at the CBOT and KCBT were leading the way to the upside, he said.

 

MGE followed a bit reluctantly as spring wheat is in "really good" condition so far, he added.

 

Spring wheat condition is expected to remain steady in the USDA's weekly crop progress report, traders said. The UDSA last week said 79% of the crop was in good-to-excellent condition.