May 24, 2007

 

US Wheat Review on Wednesday: Finishes higher in recovery from declines

 

 

Buoyed by ideas that losses Tuesday were overdone, U.S. wheat futures bounced higher Wednesday amid some short-covering, analysts said.

 

Chicago Board of Trade July wheat rose 5 1/2 cents to US$4.76 1/2 per bushel. Kansas City Board of Trade July wheat finished 3 cents higher at US$4.67 3/4, and Minneapolis Grain Exchange July wheat closed up 8 1/2 cents at US$5.06.

 

The gains came as part of a recovery from losses suffered during a "pretty rough Tuesday," when CBOT July wheat fell 8 1/2 cents, said Dan Zwicker, senior analyst with AgriVisor Services. Short-covering was a feature of Wednesday's day session, CBOT floor traders added.

 

"I think in corn and wheat we had a pretty good hit there yesterday," Zwicker said.

 

Forecasts for heavy rains in the U.S. Southern Plains also likely gave wheat prices "a little bit of a boost," Zwicker noted.

 

Wheat fields in eastern Nebraska, west-central and northeastern Kansas, northeastern Oklahoma and central Texas are on track to receive one to three inches of rain during the next five days, said Don Keeney, an agricultural meteorologist for CropCast Weather. The bulk of the moisture will fall during the next three days, with local totals reaching up to four inches, Keeney added.

 

In the six-to-10 day period, conditions are "still looking quite wet," with more rain forecast to fall in southwestern Kansas, southeastern Colorado, central and western Oklahoma and much of central and western Texas, Keeney said.

 

The precipitation could further delay harvest in parts of Oklahoma and Texas or, if accompanied by high winds, cause wheat to fall over, crop specialists said.

 

"A little rain is not a problem, could even help the wheat crop, but a lot of rain could damage the crop," according to a research note from Bill Nelson, associate vice president of AG Edwards & Sons.

 

For the rest of the week, Zwicker said he expected trading to be subdued ahead of the long Memorial Day weekend. The CBOT will be closed Monday in observance of the holiday.

 

On Wednesday, commodity funds bought an estimated 2,000 contracts at CBOT, while Man Financial sold 600 July in the pit.

 

"My guess is tomorrow the volume is going to be really quiet, and Friday ain't going to be anything," Zwicker said. "It looks like wheat wants to hold at these current levels."

 

Looking farther ahead, there will be a battle between tight global ending stocks and pressure from the beginning harvest of U.S. winter wheat, Zwicker said. Wheat prices have a seasonal tendency to falter as the new supply comes online, although there is underlying bullishness from estimates for a low world carryover, he said.

 

The U.S. Department of Agriculture's May supply/demand report pegged world carryover at 113.4 million tonnes, down 6% from 2006-07 and at the lowest since 1981-82. U.S. wheat ending stocks for 2007-08 were estimated 469 million bushels, the second lowest level since 1996-97, according to the USDA. Ending stocks for 2006-07 were put at 412 million.

 

"Seasonally, wheat prices drift down into a late June low," Zwicker said. "I think, on the international front, the market finds support from supply/demand tightening."

 

The USDA on Thursday will release weekly export sales figures for the week ended May 17. Trade estimates for wheat range from 75,000 to 150,000 metric tonnes for the old crop and 250,000 to 550,000 for the new crop.

 

In other news, the agency said Wednesday it plans in June to update its forecast for U.S. winter wheat production to account for the effect of freezing weather in April. USDA's National Agricultural Statistics Service will release the updated forecast on June 11 as part of the monthly Crop Production report.

 

Earlier this month the USDA predicted winter wheat production this year would reach about 1.62 billion bushels, an increase from the 1.3 billion bushels produced in 2006.

  

 

Kansas City Board of Trade

  

KCBT futures felt support from ideas that wheat was in an oversold condition after Tuesday's declines, a floor trader said. There was not much fresh fundamental news out, although forecasts for heavy rainfall in the Plains were seen as slightly supportive, he added.

 

News that Pakistan's government suspended wheat exports also was "friendly," the trader said. An official statement didn't say how long the export ban would last.

 

Pakistan is recording high output of wheat this year, and there are fears of an artificial price hike. The country had already announced that it would export 500,000 tonnes of wheat and intended to export around 1 million tonnes for this year's crop.

 

In pit trades, Country Hedging bought 300 July, while Fimat bought 200 July. Man Financial sold 200 July.

  

 

Minneapolis Grain Exchange

   

Trading at MGE was quiet, and volume was light, a floor broker said. MGE July wheat surged late in the session with a flurry of timed, small-lot buying around 1:05 p.m. or 1:10 p.m. CDT, he noted.

 

There was some bear spreading of July/September from Man Financial, along with some bull market spreading from Country Hedging, the broker said. Locals also tried to sell the rally, he added.

 

"Most of the day was just dead," the MGE broker said. "We were just twiddling our thumbs."