June 27, 2006
US Wheat Review on Monday: Minneapolis grain exchange hits 3-week high on crop concerns
U.S. wheat futures climbed, propelled by Minneapolis Grain Exchange prices hitting three-week highs on crop concerns and as traders look for another round of deteriorating hard red spring conditions due to adverse weather.
Basis September wheat contracts, MGE rose 13 1/2 cents to US$4.74 3/4 a bushel, Chicago Board of Trade settled 4 1/4 cents higher at US$3.85 3/4 and Kansas City Board of Trade gained 4 1/4 cents to US$4.92 1/2 a bushel.
A lack of rain in western HRS growing areas of the northern Plains and forecasts for 90-degree heat this week are generating renewed bullish enthusiasm in the market.
Jerry Gidel, analyst at North American Risk Management Services in Chicago, said he expects to see an additional decline in HRS condition when the U.S. Department of Agriculture issues its report. Last week, the government lowered the crop's good-to-excellent rating by 7 percentage points to 60%.
"It's interesting that now they're even paying attention to what's going on in the northern Plains," said Gidel.
Speculative and fund buying was dominant in the markets, and a lack of selling pressure contributed to the higher prices, a trader said. Funds bought a net 2,100 wheat contracts in Chicago as of 1:30 p.m. EDT.
"I think Chicago was kind of 'me too' market today with the other two (exchanges)," said Gidel.
Conditions are mostly favorable for the soft red winter crop traded at the CBOT, yet prices rose in step with gains at the KCBT.
Wheat futures even mustered the strength to remain higher despite losses in the CBOT corn and soybean pits.
Wheat export inspections were "very good," said Gidel, at 18.020 million bushels in the week to June 22, versus 14.364 million the previous week and pre-report estimates of 12 million to 17 million.
ABN Amro bought 1,000 September, Fimat bought 600 September, Tenco bought 400 December and Citigroup Global Markets bought 200 September. J.P. Morgan sold a net 400 September and Man Financial sold 200 September.
Tenco spread 500 July/March contracts.
KANSAS CITY BOARD OF TRADE
KCBT wheat futures rose, supported by sharply higher prices at the MGE, a short crop, rain interruptions to the Kansas harvest and lower test weights as a result of the damp conditions lately.
The Kansas HRW harvest is progressing, though scattered thunderstorms over the weekend provided interruptions. Poor yields are reported in western Kansas, while some good yields are seen in central areas.
Cutting has resumed Monday, however.
The weekly Kansas Wheat Quality Report, typically issued as the state harvest kicks into gear, will only be issued once at the end of this season due to the severely drought-affected crop. The Kansas crop is currently pegged at 291.4 million bushels, down 23.5% from last year.
In other news, Australia's winter wheat crop needs more rain to encourage plantings and help wheat already planted to germinate. Many areas across the country's winter wheat belt are awaiting rainfall that would allow farmers to begin the bulk of plantings, the government said.
At the KCBT, Frontier Futures bought 900 September, Fimat bought 600 September and Man Financial bought 500 July 2007 contracts. FStonnee sold 600 September and UBS sold 1,000 December.
ADM spread 800 July/Septembers from 8 1/4-9 cents.
MINNEAPOLIS GRAIN EXCHANGE
MGE September futures traded to three-week highs on the crop concerns and forecasts calling for hot, dry weather this week as 21% of the crop had entered the critical heading stage as of last Sunday.
One floor broker said he expects an additional decline of 3-4 percentage points in the USDA's good-to-excellent crop rating.
September shot to a US$4.75 high, the strongest price since June 5, when it hit US$4.78 a bushel. Late buying pushed the market into buy stops, which improved prices at the close, the broker said.
