June 1, 2006

 

US Wheat Review on Wednesday: Sharply down on month-end speculative sales

 

 

U.S. wheat futures ended lower Wednesday after plummeting late on on month-end speculative fund and local sales, brokers said.

 

Kansas City Board of Trade July hard red winter wheat futures gapped open Wednesday below the key psychological level of US$5.00 per bushel and never recovered, while Chicago Board of Trade July wheat fell late below the key level of US$4.00 per bushel.

 

Aggressive spreading was also noted on the technical break and ahead of the June 30 first notice day for deliveries agains the U.S. July wheat contracts.

 

Some traders said midday news that Pakistan was likely to resume wheat exports next month after a 2-1/2-year hiatus was bearish.

 

However, other traders noted U.S. wheat prices were already at non-competitive levels globally due to this spring's rally to a near-10-year high in Kansas City Board of Trade hard red winter wheat futures.

 

Wednesday's losses in gold futures and talk of better-than-expected U.S. HRW wheat harvest yields were also bearish, although the latter followed dismal pre-harvest yield expectations, brokers noted.

 

The Texas crop was 16% cut by Sunday and the Oklahoma crop was 25% cut, according to the U.S. Department of Agriculture's weekly crop progress report released late Tuesday. Weekend test cutting was also reported near the southern border of top U.S. winter wheat producer Kansas.

 

On the soft red winter wheat side, Arkansas farmers had cut 9% of their wheat, ahead of the five-year pace of 2%, and the Illinois Wheat Association will announce at a Wednesday evening meeting results of a day-long southern Illinois wheat crop tour.

 

CBOT July wheat ended Wednesday down 18 1/2 cents at US$3.93 1/2 per bushel after falling through the 20-day moving average of US$3.99 1/2 to a near-3-week low of US$3.91.

 

Speculative funds sold about 10,000 CBOT wheat futures contracts after selling about 2,000 lots by 1330 EDT, brokers said.

 

"There are some huge numbers being thrown around," one CBOT wheat trader said. "Whether it was index funds, systematic funds or CTAs, there was some pretty extreme technical damage done here today when the market fell below US$4.00 and US$3.92."

 

CBOT wheat spread trade was heavy. Rosenthal Collins spread at least 3,000 July/September, Man Financial spread 2,000 July/September, Prudential Financial spread 1,000 July/September and Tenco Inc. spread 1,000 July/September.

 

Fimat and ABN Amro earlier in the session spread 2,000 September/July while Merrill Lynch spread 1,200 September/July.

 

Midday spot U.S. HRW SRW Gulf barge bids fell 3 cents Wednesday while midday spot U.S. SRW bids were unchanged, cash sources said.

 

In global wheat news, European cash wheat prices fell Wednesday following losses in U.S. wheat futures.

 

In France, the largest EU soft wheat producer, harvest could be in full-swing in about six weeks, depending on upcoming weather, traders said.

 

 

Kansas City Board of Trade

 

KCBT July wheat closed down 14 1/4 cents at US$4.87 3/4 after falling to a 2-week low of US$4.87 1/4.

 

Spot cash 11% through 14% U.S. hard red wheat basis bids were steady Wednesday, according to the KCBT.

 

 

Minneapolis Grain Exchange

 

MGE July settled down 9 1/4 cents at US$4.61 1/2 after falling to a 2-week low of US$4.59 per bushel.

 

Cash U.S. spring wheat basis bids rose 5-20 cents per bushel Wednesday, cash sources said.

 

Wednesday's Minneapolis wheat receipts totaled 171 railcars versus last year's 28 railcars. There were 5 durum receipts versus last year's 63 cars.

 

Traders noted that although the USDA reported late Tuesday a 3-percentage-point drop in the U.S. spring wheat crop's good-to-excellent rating, to 73% in that shape, the tally still topped the average of 68%.