May 24, 2006

 

US Wheat Review on Tuesday: Mostly weak; profit-taking after new tops

 

 

U.S. wheat futures ended mixed Tuesday, with Chicago Board of Trade and Kansas City Board of Trade mostly lower on overbought conditions and profit-taking after multi-year highs early, brokers said.

 

"Take a look at the wheat chart," said John Kleist, of Kleist Ag Consulting. "It's incredibly overbought with that type of open interest jump (plus 15,019 CBOT wheat futures contracts Monday) in one day, it doesn't take much to start a profit-taking break. But it's still (trading) in the same range."

 

The wheat futures markets losses, which were moderated by a rally in gold and energy markets, followed early gains on the U.S. Department of Agriculture's report Monday a 6-percentage-point drop in the U.S. winter wheat crop's rating to 30% in good to excellent shape and forecasts for more hot temperatures in the U.S. Plains they said.

 

CBOT July wheat ended down 6 1/2 cents at US$4.19 3/4 per bushel after setting early a 3-1/2-year top of US$4.33.

 

The 9-day RSI for CBOT July wheat was 71.

 

Speculative funds 1,500 contracts, brokers said. Fimat and Tenco Inc. each bought about 500 July; O'Connor and Co. bought 1,500 July and 300 December; and ADM spread 1,000 July/September, they said.

 

U.S. 2006 soft red winter wheat production should top last year's tally, but traders noted last week's wet weather had harmed Indiana and Ohio's SRW crops.

 

Still, they noted record CBOT soft red winter wheat futures open interest Tuesday of 518,085 contracts was nearly seven times larger than the U.S. SRW crop, they noted.

 

Talk that part of Monday's rally may have been lifting of short CBOT hedges, possibly by Australia, amid potential Indian business and rumors of possible Russian and German wheat sales to Iraq circulated.

 

"People are reaching," one CBOT trader said. "However, the selling here hasn't been heavy and there has been good buying as the market dips, possibility by a commercial. The trade is confused with prices at these levels."

 

Cash U.S. SRW basis sagged early Tuesday on heavy farmer sales, cash sources said.

 

Midday spot U.S. HRW Gulf barge bids were flat Tuesday, cash sources said. Spot SRW bids fell 20 cents as the soft red winter wheat harvest began in Arkansas and wheat stocks at the South Mississippi Gulf grew 6% last week, cash sources said.

 

In wheat export news, Japan sought 151,000 tonnes of wheat including 65,000 tonnes of U.S. wheat.

 

In global wheat news, French cash wheat prices were higher Tuesday and French milling wheat, corn and London feed wheat futures set contract highs following gains in U.S. wheat futures, brokers said.

 

U.S. wheat traders also continued to wait for any news of wheat sales to Iraq or India, along with any fresh news about Argentina's export situation.

 

Wheat Australia Ltd. could yet still complete lengthy negotiations for the sale of 350,000 metric tonnes of wheat to Iraq, which is considering cutting an unacceptable clause from a supply contract, Agriculture Minister Peter McGauran said Tuesday.

 

Finally, wheat traders continued to track news of a drought in China that could curtail winter wheat production in the world's largest wheat producing nation.

 

 

Kansas City Board of Trade

 

KCBT July wheat closed down 5 1/2 cents at US$5.12 after rallying to a near 10-year top of US$5.22 1/2.

 

The 9-day RSI for KCBT July wheat was 76.

 

Spot cash 11% U.S. hard red wheat basis bids were unchanged Tuesday; while bids for 12% HRW rose 2 cents; and bids for 13% and 14% rose 5 cents, according to the KCBT.

 

The USDA reported conditions in top U.S. winter wheat producer Kansas fell another 3 percentage points in the good-to-excellent category. Twenty-two percent of the crop in Kansas was rated in good-to-excellent condition, compared to 25% last week.

 

Light rains fell Tuesday in the Central Plains after scattered rains of up to 0.50 inch overnight in parts of the western belt, but temperatures were expected to remain above normal, ranging from the upper 80s to the mid-90s (Fahrenheit) through Thursday, said Joel Burgio, a meteorologist with DTN Weather.

 

Dry weather and temperatures in the upper 80s to 90s were expected on Friday and Saturday, while the six- to 10-day outlook called for above to much-above normal temperatures and near to below-normal rainfall, Burgio said.

 

 

Minneapolis Grain Exchange

 

MGE July wheat settled down 2 3/4 cents at US$4.78 per bushel after rallying early to a 3-1/2-year high of US$4.86.

 

The 9-day RSI for MGE July wheat was 72.

 

Cash spring wheat basis bids were steady late Tuesday after recent weakness amid heavy movement, cash sources said. Tuesday's Minneapolis wheat receipts totaled 146 railcars versus last year's 142 railcars. There were zero durum receipts, on par with last year's receipts.

 

The USDA reported Monday that 90% of the U.S. spring wheat crop had been planted, below last year's 93% but above the five-year average of 85%.

 

Some sources noted that the multi-year highs in spring wheat futures prices may have persuaded some farmers to plant wheat instead of switching to soybeans.

 

"Increased spring wheat plantings could dampen the price rise a little bit," said Mike Woolvertonne, an extension grain economist at Kansas State University, on Monday. "But at this late date, even though they are switching it more acres of spring wheat, they are putting it in late and the acreage will not be great, so we probably won't see a huge increase from that source. It's not negligible, but it won't solve the (tight U.S. high protein hard wheat) problem."