May 23, 2006

 

US Wheat Review on Monday: Ends up on speculative buying, human rights watch crop

 

 

U.S. wheat futures ended higher Monday, despite overbought technical signs, on speculative buying and concerns about further yield losses in the U.S. hard red winter wheat crop, brokers said.

 

"This is the same story being played out every day," one wheat broker said. "The market is feasting on the uncertainty about how large the U.S. hard red winter wheat crop will be."

 

Early Texas and Oklahoma winter wheat harvest yields were poor, as expected, wheat brokers said.

 

Yields ranged mostly in the 10 to 20 bushel-per-acre range outside Altus, outside of Oklahoma City, and near Eldorado, Okla., traders said.

 

Moreover, above-normal temperatures were expected this week in the U.S. Plains hard red winter wheat belt, prompting concerns that areas that have survived the drought thus far will be damaged.

 

"Temperatures will be above normal, with highs in the 80s and 90s (Fahrenheit) each day, but I don't know that we'll see any 100-degree temperatures during this period," said Joel Burgio, a meteorologist with DTN Weather.

 

"We should see middle-90s in some areas, particularly southern Kansas and south," he added. "Thursday and Friday look mostly dry, with high temperatures continuing to reach the 80s and 90s-80s north and 90s south. And the 6- to 10-day outlook, we're talking about temperatures above normal and rainfall mostly below normal."

 

CBOT July wheat ended Monday up 10 cents at US$4.26 1/4 after setting a 3 1/2-year high on continuous charts of US$4.28 per bushel.

 

The 9-day Relative Strength Index for CBOT July wheat closed Monday at 81, well above the overbought level of 70.

 

Monday's settlement in CBOT July wheat futures was the highest official closing price for a nearby contract on monthly continuous charts since September 1996 monthly close of US$4.36 despite USDA's forecast for a year-over-year increase in U.S. SRW production, brokers noted.

 

"CBOT wheat open interest (which hit a record early Monday of 503,066 contracts) is six times U.S. soft red winter wheat production," one broker said. "This is not a SRW market, this contract is a proxy for everyone's idea of what wheat is in the broadest sense. It has all the makings for a real debacle. Look back to 1996 and see how quickly this market fell apart."

 

Funds were thought to have bought about 4,500 CBOT wheat futures on Monday, brokers said.

 

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

 

Monday's U.S. wheat futures rally bucked several bearish items, including an upward revision in former Soviet Union wheat production, and an uncertain demand picture that included questions about near-term Iraqi and Indian imports, brokers said.

 

Newswires reported one analyst's forecast for Ukraine's 2006 grain crop rose 7% to between 34.3 million and 34.5 million metric tonnes from its previous estimate of 32.1 million because of good growing weather in April and May.

 

Agricultural consultant UkrAgroConsult said Ukraine was likely to harvest up to 12.6 million metric tonnes of wheat this year, above its forecast last month for 11.4 million metric tonnes.

 

Wheat Australia Ltd. said Monday it has ended negotiations to supply 350,000 metric of wheat to Iraq.

 

Traders also continued to eye reports from Argentina, following last week's news that wheat producers have agreed among themselves to a self-regulating system of export limits because of tighter supplies this year and domestic inflation.

 

Brazil's wheat industry, concerned about the possibility that Argentina might limit wheat exports, has asked the Brazilian government to temporarily eliminate an 11% tariff on wheat from other countries, an industry executive said Friday.

 

In other news, Syria said Saturday it is tendering to sell 50,000 metric tonnes of wheat.

 

 

Kansas City Board of Trade

 

KCBT July wheat ended Monday up 13 1/4 cents at US$5.17 1/2 after setting a nearly 10-year top of US$5.18 per bushel.

 

The 9-day RSI closed at 84, well above the overbought level of 70.

 

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

 

 

Minneapolis Grain Exchange

 

MGE July wheat closed up 11 3/4 cents at US$4.80 3/4 per bushel.

 

Cash spring wheat basis bids were steady Monday, cash sources said. Monday's Minneapolis wheat receipts totaled 70 railcars versus last year's 436 railcars. There were 8 durum receipts versus last year's 30 cars.

 

Some wheat marketing sources noted that the rise in prices was buying additional late spring wheat plantings.