June 26, 2007

 

US Wheat Review on Monday: Finishes mixed amid harvest uncertainty

 

 

U.S. wheat futures closed mixed Monday as market participants waited for more concrete results from the advancing winter wheat harvest, traders and analysts said.

 

Chicago Board of Trade July wheat slipped 2 3/4 cents to US$5.89 1/2 per bushel, CBOT September wheat ended down 1/2 cent at US$6.04 1/2, and CBOT December wheat rose 2 1/4 cents to US$6.14 3/4.

 

Kansas City Board of Trade July wheat fell 2 3/4 cents to US$5.68, KCBT September wheat closed 3/4 cent lower at US$5.79 3/4, and KCBT December wheat finished unchanged at US$5.95. Minneapolis Grain Exchange July wheat settled unchanged at US$6, MGE September wheat slumped 3 cents to US$5.93 1/2, and MGE December wheat climbed 3 cents to close 2 1/2 cents higher at US$6.05.

 

Trading was choppy during the day session as pressure from expanded cutting met with underlying price support from reports about poor yields and test weights, floor traders said. The trade seems comfortable with prices at their current levels and wants to see more definitive information about the harvest results before pushing prices higher, said Shawn McCambridge, analyst at Prudential Financial.

 

So far, yields and test weights have been widely varied, McCambridge said. Until the markets receive more information about harvest results, prices will likely remain range-bound and trading will be choppy, he added.

 

"I think the market wants to see more confirmation that the production losses were actually there and also quantify it before we take prices higher again," McCambridge said. "You can't really generalize the crop."

 

In southern Illinois, there are virtually no soft red winter wheat fields that aren't cut yet, said Dave Marshall, an independent marketing advisor and commodities broker in Nashville, Ill. Harvesting progressed "very, very fast" compared to normal, he said.

 

The U.S. Department of Agriculture is slated to release an update on winter wheat harvesting at 4 p.m. EDT Monday. As of June 17, 11% of the country's crop was harvested, compared with 34% the previous year and a five-year average of 20%. Illinois' harvest was 39% complete, up from the five-year average of 18%.

 

"The dry weather we had in June certainly helped to promote that," Marshall said about Illinois' rapid harvest pace.

 

In other news, Egypt's state-owned General Authority for Supply Commodities said this weekend it bought 120,000 metric tonnes of U.S. soft red wheat in a tender. The news was supportive for wheat futures and reminded the trade about historically tight global supplies, analysts said.

 

Weekly U.S. wheat export inspections, meanwhile, were within trade expectations. The USDA said inspections for the week ended June 21 totaled 16.004 million bushels, while trade estimates were 12 million to 18 million.

 

For the current market year to date, 42.138 million bushels have been inspected for export, compared with 42,138 inspected at the same time last year, according to the USDA. The marketing year for wheat began June 1.

 

 

Kansas City Board of Trade

 

Expansion of the hard red winter wheat harvest in the Texas Panhandle and north into Nebraska put a lid on gains in KCBT wheat futures, a floor trader said. Results continue to be varied, traders said.

 

Rain is forecast for most days this week and weekend from eastern Kansas through much of Oklahoma and Texas, according to a midday forecast from T-Storm Weather. Flood watches may need to be expanded in the area as the week progresses, the private weather firm said.

 

"The situation appears increasingly unfavorable for this area," the forecast said.

 

Grant County in northern Oklahoma may produce 15% to 25% of a normal winter wheat crop, with an average test weight of 53 to 54 pounds per bushel, Oklahoma State University agricultural economist Kim Anderson wrote in a market analysis. Insurance adjusters have written or are writing off up to 60% of the wheat in the county, he added.

 

The USDA this month pegged Grant County's winter wheat production at 7.9 million bushels, down from 8.1 million bushels in 2006. Oklahoma is expected to produce a total of 151.8 million bushels of winter wheat this year, up from 81.6 million in 2006, according to the USDA. Crop specialists have said the state's output will be lower than the estimates due to damage from weather and disease.

 

 

Minneapolis Grain Exchange

 

The feature of the day at MGE continued to be an active July/September spread, a floor trader said. There were few sellers until late in the day session, he added.

 

MGE is feeling price support from poor results of the HRW wheat harvest in the Southern Plains, an analyst said. Reports of poor protein levels are bullish for spring wheat, which is traded at MGE, he said.

 

Spring wheat looks good so far, analysts said. As of June 17, the USDA rated 85% of the crop in good-to-excellent condition.

 

In other news, analysts expect Statistics Canada on Tuesday to report a wheat acreage drop in its updated seeding intentions survey for the 2007 season. The area seeded to spring wheat is thought to have declined due to wet conditions at the time of seeding, one analyst said.