June 4, 2007

 

US Wheat Review on Monday: Retreats from gains on profit-taking

  

 

U.S. wheat futures finished mostly lower Monday as late profit-taking pulled prices back from solid earlier advances, traders and market analysts said.

 

Chicago Board of Trade July wheat ended down 1/2 cent at US$5.20 1/4 per bushel; Kansas City Board of Trade July wheat slipped 2 3/4 cents to US$5.04 3/4; and Minneapolis Grain Exchange July wheat closed 2 1/2 cents lower at US$5.33 1/4.

 

Before trimming gains, CBOT July wheat set a new open outcry contract high of US$5.31, exceeding the previous high of US$5.30 1/2 set Friday. CBOT September wheat matched its contract high of US$5.44.

 

Prices slumped during the final stretch of the day session on profit-taking after recent gains, traders said. Wheat had opened firmer and traded higher for much of the session on concerns about tight global ending stocks and production loss, analysts added.

 

There are concerns about crop loss in Ukraine and southern Russia, areas that have suffered from parched conditions. DTN Meteorlogix said the very dry areas of eastern Ukraine and southern Russia will stay dry this week but temperatures will turn cooler. That will help ease recent crop stress, although there have already been losses this year because of dryness, according to the weather firm. Showers occurred in western Ukraine during the past weekend, but additional rainfall is not likely to begin this week, Meteorlogix said.

 

A new stretch of heat in central China also will be stressful to crops and reduce soil moisture, according to Meteorlogix. Central China crop areas will be mainly dry through Sunday, with temperatures reaching into the 90s to low 100s Fahrenheit across the entire North China Plain during this week, the firm said.

 

Commodity funds unwinding short positions and taking long positions also gave wheat futures technical strength, traders added. Funds bought an estimated 2,000 contracts at CBOT.

 

Non-commercial speculative funds trimmed short CBOT wheat futures and options positions by 3,628 lots and lifted longs by 2,476 lots in the week ended May 29, the Commodity Futures Trading Commission said in a supplemental report. The funds were net short 15,788 contracts.

 

Prices also felt "a little bit of a boost" from news that Egypt's state-owned General Authority for Supply Commodities, or GASC, said during the weekend that it bought 180,000 tons of U.S. soft red wheat as part of 240,000-ton tender, an analyst said. The wheat is for delivery July 10 to Aug. 20.

 

Looking ahead, there will have to be "a little bit more significant crop losses overseas if we're going to go much higher" with prices, an analyst said. More damage will be necessary because prices are already elevated, and demand tends to shut off with CBOT July wheat above US$5, he noted.

  

 

Kansas City Board of Trade

 

KCBT wheat futures felt continued support from fears about harvest delays and damage from excessive precipitation in the Plains, a KCBT floor trader said. Southern Plains wheat areas had rainfall of up to 1 1/2 inches in Oklahoma and Texas during the past weekend, according to Meteorlogix. A variable weather pattern is in store for the region this week, with more periods of showers as part of the outlook.

 

"Some harvest delays are in store in southern areas," Meteorlogix said. "The next week and a half, however, brings in drier weather for Oklahoma and Texas through southern Kansas. This feature will need to be monitored for the potential of enhancing wheat harvest progress."

 

U.S. winter wheat condition ratings are expected to drop 1 to 2 percentage points in the USDA's weekly crop progress report due at 4 p.m. EDT Monday, analysts said. Wetness in the Plains is thought to have damaged HRW wheat, they added. The USDA rated 57% of the total winter wheat crop in good-to-excellent condition as of May 27, a drop of 2 percentage points from the previous week.

 

Speculative funds cut short KCBT wheat futures and positions by 981 lots, longs by 739 lots and were net long 7,266 contracts, according to a CFTC supplemental report.

  

 

Minneapolis Grain Exchange

 

MGE wheat futures were seen as a reluctant follower to the early gains at the CBOT and KCBT, a MGE floor trader said. Ideas that the spring wheat crop is doing well so far are bearish, he noted. U.S. spring wheat ratings are expected to hold steady at 79% good to excellent in the USDA's crop progress report, analysts said.

 

Speculative funds decreased short MGE wheat futures and options by 26 lots, longs by 199 lots and were net long 14,152, the CFTC said.