June 16, 2007

 

US Wheat Review on Friday: Mostly down, marekts step back after rallies

  

 

U.S. wheat futures drifted mostly lower Friday on light profit-taking as the markets took a breather after soaring to historic highs this week, floor traders said.

 

Chicago Board of Trade July wheat finished flat at US$6.06 1/2 per bushel, Kansas City Board of Trade July wheat closed down 3 3/4 cents at US$5.96 1/4, and Minneapolis Grain Exchange July wheat settled 1 3/4 cents lower at US$5.86 1/4.

 

It was notable that CBOT July wheat ended above US$6, a psychologically important level, because that will help maintain bullish technical momentum, an analyst said. The contract broke through US$6 on Thursday in a rally to a new contract high and a fresh 11-year high for a front-month contract.

 

Wheat is technically overbought after the week's rallies, but market participants were hesitant to press prices too much going into the weekend amid shrinking global supplies, a CBOT floor trader said. The U.S. Department of Agriculture this week pegged 2007-08 global wheat supplies at 112 million tonnes, the lowest level in 30 years.

 

Gains in CBOT corn and soybeans also provided some spillover strength in choppy trading earlier in the day session, traders said. The neighboring markets ended firmer.

 

Wheat, however, did not see the strong fund buying that had aided the week's earlier rallies, an analyst said. Funds bought an estimated 1,000 contacts at CBOT.

 

Along with profit-taking, forecasts for drier weather in the U.S. southern Plains next week also weighed on wheat prices, traders said. Heavy rains in the region have harmed the hard red winter wheat crop and delayed harvest in Oklahoma. Now, there are ideas harvest will be able to progress.

 

In major international crop areas, ongoing dryness in central China, West Australia and Ukraine is expected to continue during the weekend and into early next week, DTN Meteorlogix said.

 

Wet weather is delaying wheat harvest in Europe and will continue to do so during the weekend, the weather firm said. Wheat in France, the U.K., the Benelux countries, and Germany is the hardest-hit by the rains, Meteorlogix said.

 

In other bearish news, Egypt's state-owned General Authority for Supply Commodities canceled a tender to buy at least 55,000-60,000 metric tonnes of wheat for shipment July 11-20, on a free-on-board basis. Prices were too high, traders said.

 

GASC had said it was looking to purchase 55,000-60,000 tonnes of U.S. HRW wheat, U.S. soft red wheat, U.S. soft white wheat, French milling wheat, Argentine wheat or Kazakhstan wheat, and 25,000-60,000 tonnes of Russian, German, U.K. or Syrian wheat.

  

 

Kansas City Board of Trade

 

The southern Plains saw rainfall of up to 1.25 inches Thursday from south-central Kansas through Oklahoma into northeastern Texas, according to Meteorlogix. Additional scattered showers and thunderstorms are in store for the region during the next five days, the weather firm said Friday.

 

However, the six- to 10-day period offers more chance for dryness, which should "allow for more significant increases in completed harvest percentages," Cropcast Agricultural Weather said in a forecast. T-Storm Weather also called for conditions to dry up next week.

 

"Wheat harvesting should slowly begin to improve," the weather firm said. "A round of (thunder) storms may occur around midweek from Kansas and northward, but weather from next week and beyond should be considerably drier."

  

 

Minneapolis Grain Exchange

 

MGE saw thin trading, with local buying lifting wheat futures earlier in the day session, a floor broker said. Light profit-taking added pressure and dragged prices into negative territory, he said.

 

There was not much interest from the funds, the broker added.

 

"It's kind of just slacked off here" from earlier in the week, he said. "The only reason we were up is because of light volume."

 

In other news, private analytical firm Informa Economics estimated 2007 U.S. spring wheat acres at 13.958 million acres, up from the USDA's March estimate of 13.808 million. The USDA is scheduled to release an updated estimate of 2007 planted acreage on June 29.