June 9, 2007

 

US Wheat Review on Friday: Ends up on positioning before USDA report

 

 

U.S. wheat futures ended higher Friday on positioning ahead of the release of Monday's U.S. Department of Agriculture's June supply and demand report, analysts said.

 

Chicago Board of Trade July wheat rose 3 cents to US$5.27 1/2 per bushel. Kansas City Board of Trade July wheat finished up 6 cents at US$5.18 1/2, and Minneapolis Grain Exchange July wheat closed 1 3/4 cents higher at US$5.32.

 

The USDA at 8:30 a.m. EDT (1230 GMT) Monday is slated to issue the report, which will include new estimates for U.S. and global wheat carryout and production. There is enough uncertainty about the U.S. winter wheat crop after a hard spring freeze and recent heavy rains in the Plains that market participants did not want to be short before the report comes out, said Dale Durchholz, senior analyst with AgriVisor Services.

 

There is also uncertainty about the status of the world wheat crop, including questions about the extent of damage from a severe drought in Ukraine, Durchholz said.

 

"Maybe it's just people don't know what to expect," Durchholz said.

 

Of 13 analysts surveyed by Dow Jones Newswires about their expectations for the USDA's all winter wheat production estimate, the average guess was 1.640 billion bushels, up from the USDA's May estimate of 1.616 billion. The average guess for soft red winter wheat production was 350 million bushels, up from the USDA's May estimate of 347 million, according to a poll of 12 analysts.

 

Of 15 analysts surveyed about U.S. wheat carryout, the average guess was 412 million bushels for old-crop stocks, which is the same as the USDA's May estimate, and 490 million for new crop stocks, up from the USDA's May estimate of 469 million.

Even though U.S. carryout is predicted to increase, analysts said they expected the trade to focus more on the world situation, including tight global ending stocks and possible downward production revisions for Ukraine and the E.U.-27.

 

Before advancing, wheat futures opened lower Friday on follow-through selling from the overnight session and under pressure from losses in CBOT corn and soybeans, analysts said. Spillover weakness from the neighboring markets weighed on wheat until corn and soybeans cut their losses later in the day, allowing wheat to move into positive territory, they said.

 

Looking forward, activity in corn and soybeans will continue to influence wheat prices, a CBOT floor trader said. Weather forecasts and the contents of Monday's report will also provide direction next week, analysts said.

 

Major crop areas in the North China Plain have mostly dry and hot weather ahead during the next three days, according to DTN Meteorlogix. The exception will be in the western and southern areas of the plain, where rain showers will develop, the weather firm said.

 

"Summer crop stress will be significant through the early part of next week," Meteorlogix said.

 

In Ukraine, the Black Soils region, and the Volga Valley of Russia, a few showers will move into the area Monday, according to Meteorlogix. Otherwise, there is limited rainfall ahead through the next week.

 

In other news, Argentina's farmers have planted 24% of the 5.2 million hectares seen going to wheat in the 2007-08 crop cycle, the Agriculture Secretariat said in its weekly crop report. The forecast sees area down 5.5% from the area dedicated to wheat in 2006-07, according to the Secretariat.

 

The Buenos Aires Cereals Exchange sees 5.4 million hectares going to wheat this season, down 3% from last year. However, analysts expect wheat plantings to be in line with, or higher, than last year due to a recent surge in wheat prices.

 

Kansas City Board of Trade

 

KCBT wheat futures ended firmer as market participants took positions ahead of the USDA report, a KCBT floor trader said. There are some concerns about a "sketchy forecast" for harvesting hard red winter wheat, although the dominant idea is that the harvest will be able to advance significantly next week, he added.

 

The Southern Plains will see mostly dry weather this weekend through Sunday, when scattered rain showers will develop and drop totals of up to three-quarters of an inch, Meteorlogix said. These showers will bring the possibility for harvest delays, the weather firm said.

 

Next week, additional showers will occur, mainly in northern and eastern areas. The "promising" wheat crop in western Kansas will be on the drier side of this moisture pattern, which will favor the harvest and yield outlook in that sector of the Plains, Meteorlogix said.

 

For the June supply and demand report, HRW wheat production is estimated at 1.056 billion bushels, up from the USDA's May estimate of 1.028 billion, according to a survey of 12 analysts.

 

Minneapolis Grain Exchange

 

Trading at the MGE was relatively quiet, with prices seen following activity at the CBOT, a floor trader said. Early declines in CBOT corn and soybeans pulled prices lower, he noted.

 

Moves by corn and CBOT wheat into positive territory yanked MGE wheat futures along for the ride, the trader said. There is some support from reports that spring wheat fields have been flooded out by heavy rains, although it's still early to become too worried about damage or losses, he said.

 

The average guess for white winter wheat production in the USDA supply and demand report is 237 million bushels, down from the USDA's May estimate of 241 million, according to a survey of 11 analysts.