June 1, 2007

 

US Wheat Review on Thursday: Closes higher after shaking off retreat

 

 

U.S. wheat futures settled higher Thursday, shaking off a late-session retreat to recapture earlier gains amid fears about unfavorable crop weather, floor traders said.

 

Chicago Board of Trade July wheat rose 6 1/4 cents to US$5.17 per bushel, the contract's highest close since April. Kansas City Board of Trade July wheat finished up 3 1/4 cents at US$5.04, and Minneapolis Grain Exchange July wheat advanced 8 1/2 cents to US$5.37 1/4.

 

Wheat futures climbed in early trading amid follow-through and technical buying after a strong rally Wednesday, traders said. Concerns about crop losses from drought conditions in Ukraine and Russia remained friendly, they added.

 

Abnormal heat has impacted nearly two-thirds of Ukraine's winter wheat areas and 40% of Russia's, according to a report from EarthSat Weather Services. In the last half of May, temperatures averaged 10 degrees to 15 degrees Fahrenheit above normal in all major wheat areas of Ukraine and adjacent areas in Russia, the weather firm said.

 

Record heat "has been impressive in intensity, but the duration of this heat wave is particularly amazing," EarthSat reported.

 

Potential crop losses from the heat and dryness come as global wheat ending stocks are already tight. The International Grains Council last week forecast that world carryout for 2007-08 would drop 3 million tonnes from 2006-07 and hit its lowest level since 1981.

 

An announcement that Spain bought 120,000 metric tonnes of U.S. soft red winter wheat in the 2007-08 marketing year also gave CBOT prices another boost, an analyst said. The wheat marketing year begins June 1.

 

Late in the day session, wheat retreated from its early gains and dipped lower amid profit-taking and liquidation of long positions, a CBOT floor broker said. Market participants had "been long all day," he said. "What goes up must come down."

 

Prices bounced back before the close as participants bought the break and the trade refocused on tight supply concerns, traders said. Moving forward, the trade will be keeping an eye out for more specific news about Ukraine and waiting to see what commodity funds do in the market, a CBOT floor trader said.

 

In CBOT pit trades, Fimat bought 2,600 December, while Man Financial bought 1,000 December and 400 July. Fimat bought 500 December, and UBS bought 400 March. Commodity funds bought an estimated 4,000 contracts.

 

 

Kansas City Board of Trade

  

Harvest delays from excessive precipitation in the U.S. Plains are still lending strength to prices, floor traders said. Thundershowers brought up to one inch of rain to eastern Oklahoma and northeastern Texas on Wednesday, according to DTN Meteorlogix.

 

A continuation of the pattern of periodic showers is expected to remain in effect through the weekend. Additional showers and thunderstorms will develop in the Texas Panhandle through western and southern Oklahoma and into north-central Texas during the Sunday through Tuesday time frame of next week, Meteorlogix said.

 

"As a result, harvest conditions will be less than desirable for winter wheat," Meteorlogix said. "The crop is already damaged in Kansas by cold weather in April and wet conditions during May.

 

Prices broke late in the session because the trade is unsure about "a number of things," including the extent of damage from Ukraine's drought and the impact of the Plains wetness, a KCBT floor broker said.

 

"I think there's just a lot of uncertainty in the market and a lot of volatility," the broker said. "You run out buyers at the time and you run out sellers at times."

 

 

Minneapolis Grain Exchange

  

Market-on-close orders pulled MGE wheat futures to a strong finish, a floor trader said. UBS was a noted MOC buyer, he said. Speculative, month-end buyer also was seen as supportive, the trader added.

 

The solid finish was a switch from earlier activity at MGE. Prices had trailed advances at the CBOT and KCBT amid farmer selling and ideas that the spring wheat crop was off to a good start, another MGE floor trader said.

 

"We've got probably the best growing conditions we've had in spring wheat in the U.S. and Canada in a few years," he said.