US Wheat Review on Monday: Lower on fund selling, weak demand

 

 

U.S. wheat futures closed sharply lower, near their session lows and scored a fresh three-week low Monday. The markets were pressured by bearish outside market forces that included a stronger U.S. dollar and lower U.S. equity prices. Weak demand for U.S. wheat also emboldened market bears, said an analyst.

 

"Wheat is under extreme pressure," said Victor Lespinasse, veteran grain market analyst with www.grainanalyst.com. "There was fund selling today. U.S. wheat is just overpriced right now. We need to come down in prices to be competitive on the world market," he said.

 

July CBOT wheat ended down 23 cents at US$6.00; July KCBT wheat gapped lower on the daily bar chart and closed down 21 3/4 cents lower at US$6.53 1/4; and July MGE wheat finished down 21 1/2 cents at US$7.22.

 

Monday's weekly grain export inspections report showed wheat inspections at 17.454 millions bushels versus 10.302 million last week.

 

The U.S. winter wheat harvest is gathering momentum, with fields already picked as far north as Arkansas, North Carolina and Oklahoma. Although the U.S. Department of Agriculture said just 11% of the crop in Texas - normally the first state to begin gathering wheat each season - had been cut entering the month, a harvest report issued Friday by U.S. Wheat Associates said "The Texas hard red winter harvest is progressing quickly."

 

The group said HRW harvest in the Waco, Texas, area is already nearing completion - with wheat carrying "good quality characteristics" and yields in the low-to-mid 30-bushel per acre range - although yields from fields around Dallas have been highly variable.

 

Traders are starting to look ahead to the USDA crop report due out at 8:30 a.m. EDT Wednesday. Despite worries about disease and low yields, the USDA is not expected to make major changes to its 2009 U.S. winter wheat output estimates. The report will include a breakdown of production by classes, including hard red winter wheat, soft red winter wheat and white winter wheat. The USDA also is slated to issue updated estimates for old- and new-crop U.S. wheat carryout. The average of analysts' estimates for all-wheat production is 2.021 billion bushels, compared with the USDA's May estimate of 2.026 billion, according to a Dow Jones Newswires survey of 11 analysts. The average of analysts' estimates for total winter wheat production is 1.496 billion, compared with the USDA's May estimate of 1.502 billion, according to a survey of 12 analysts.

 

In export news, an official with the Grain Board of Iraq said Monday that Iraq had issued a new tender to buy at least 50,000 tonnes of hard wheat, but that news was already in the markets, a CBOT trader said. It wouldn't be surprising to see Iraq buy wheat from Canada or possibly Australia, he said.

 

For Chicago wheat, non-commercial speculative funds trimmed their net short position to 6,793 contracts as of June 2, the CFTC says in a supplemental report. That is down from being net short 14,700 contracts as of May 26.

 

European wheat futures trade lower suffering from a lack of fresh demand. "It is very quiet, we need new export demand," said a Germany-based broker. "We are not really competitive ... business is difficult." He added that no one is worried about the production outlook for the new crop due to ideal weather conditions in most regions and this is part of the reason business is quiet in Europe.

 

 

Kansa  City Board of Trade

 

In hard red winter wheat areas of the central and southern U.S. Plains, conditions should remain "favorable" for heading and filling wheat in the north, private weather firm DTN Meteorlogix said. Cool and damp weather should continue to delay development of spring wheat in the northern Plains, traders said.

 

At the KCBT, non-commercial speculative funds were net long 9,547 contracts, up from being net long 7,976 contracts as of May 26, the CFTC says in another supplemental report.

 

 

Minneapolis Grain Exchange

 

At the MGE, non-commercial speculative funds were net long 9,326 contracts, compared with being net long 7,685 contracts a week earlier, according to the CFTC.