May 30, 2007

 

US Wheat Review on Tuesday: Closes lower on spillover, overdone ideas

 

 

U.S. wheat futures tumbled Tuesday, erasing advances from Friday on spillover pressure from neighboring markets and ideas that last week's gains were overdone, analysts said.

 

Chicago Board of Trade July wheat slumped 10 cents to US$4.91 per bushel. Kansas City Board of Trade July wheat ended 8 1/4 cents lower at US$4.81, and Minneapolis Grain Exchange July wheat fell 11 1/2 cents to US$5.13 1/2.

 

CBOT corn and soybeans also ended the day session with steep losses, and their weakness weighed on wheat, analysts said. Spillover pressure "really is the only major factor" that accounted for wheat's decline, said Doug Harper, analyst with Brock Associates.

 

Wheat futures climbed sharply higher Thursday and Friday last week amid concerns about tight ending stocks and threats to global production. There were ideas Tuesday that last week's rallies were overdone, traders said.

 

Beneficial rain that fell across the U.S. northern Plains and into Canada was also bearish for prices, said Bill Nelson, associate vice president with AG Edwards & Sons. Favorable rains fell in key E.U. wheat regions, as well.

 

Still, dryness in Ukraine remains a concern, traders noted. Half of Ukraine's winter wheat crop will be lost without rain soon to alleviate overly dry conditions, Cropcast said in a daily report.

 

"Yield losses are occurring as the crop is in the most critical stage of heading and those losses are irreversible," the report said. "The next two weeks are critical."

 

Cropcast forecasters expect Ukraine to remain hot over the next week with limited rain potential for the next five days.

 

Along with Ukraine, Russia and central China were dry and hot during the weekend, according to DTN Meteorlogix. High temperatures reached 100 degrees Fahrenheit in eastern Ukraine through the northern Caucasus region of Russia, Meteorlogix said.

 

Central China will have some showers late in the week, but the general weather pattern is hot and dry during the next six to 10 days, Meteorlogix said. Ukraine and western Russia also have mostly dry and hot weather in store through the rest of this week, the weather firm added.

 

In other news, the U.S. Department of Agriculture said weekly U.S. wheat export inspections totaled 13.840 million bushels, below trade expectations of 18 million to 23 million. For the current marketing year to date, 871.590 million bushels have been inspected for export, down from 957.945 million at the same point last year, according to the USDA.

 

Looking ahead, the USDA at 4 p.m. EDT (2000 GMT) Tuesday will put out its weekly crop progress report, including new condition ratings for winter and spring wheat. There did not appear to be a strong consensus among analysts about whether good-to-excellent condition ratings for winter wheat would continue to improve.

 

The agency said 59% of the crop was in good-to-excellent condition as of May 20, up from 58% the previous week. Harper said he expected ratings to go up another percentage point or two based on generally favorable weather conditions. Nelson, meanwhile, said he would not be too surprised to see a small increase or a small decrease.

  

 

Kansas City Board of Trade

 

Pressure from losses in the neighboring markets, along with a general lack of buyers, weighed on KCBT wheat futures, a floor trader said. Volume was relatively light, he added.

 

"We just kind of went down with the corn and beans," the trader said.

 

Southern Plains wheat areas have a new round of showers and thunderstorms ahead, which will delay harvest in Texas and Oklahoma and hinder crop quality, Meteorlogix said. Rainfall of up to one inch, with locally heavier amounts, occurred in the eastern and southern sectors of the southern Plains during the past weekend, the firm said.

 

Additional rain of up to 1 1/2 inches is seen headed for the southern Plains wheat country during this week.

 

"The rain is occurring at an unfavorable time for the wheat crop, which needs dry and warm weather to maintain crop quality and field conditions for harvest, especially in Texas and Oklahoma," Meteorlogix said.

  

 

Minneapolis Grain Exchange

 

MGE wheat futures led the downside amid ideas that the spring wheat crop is doing well so far, a floor trader said. The USDA rated 81% of the spring wheat crop in good-to-excellent condition as of May 20.

 

Traders said they did not expect the ratings to drop in the weekly progress report. It would be difficult for the ratings to improve, however, because they are already so high, they added.

 

Otherwise, MGE futures were seen as a follower of activity at the CBOT, the floor trader said. Going forward, the trade may refocus on fears about production problems in Ukraine amid tight global ending stocks, he added.