June 27, 2007

 

US Wheat Review on Tuesday: Rallies on harvest worries, tight stocks

 

 

U.S. wheat futures soared to new contract highs Tuesday on concerns about the lagging domestic harvest and shrinking global supplies, analysts said.

 

Some contracts rallied 30 cents to the exchange-imposed daily price ceiling before trimming gains.

 

Nearby Chicago Board of Trade July wheat settled up 19 cents at US$6.08 1/2 per bushel and matched an 11-year high for a front-month contact during the day session. CBOT December wheat set a new contract high of US$6.43 1/2, exceeding its previous high of US$6.34, before closing up 19 1/4 cents at US$6.34.

 

Kansas City Board of Trade July wheat climbed 20 1/2 cents to US$5.88 1/2, and Minneapolis Grain Exchange July wheat finished 20 cents higher at US$6.20.

 

The winter wheat harvest is behind schedule after weeks of heavy rains delayed cutting in the Southern Plains. More delays are likely as widespread precipitation is forecast from southeastern Kansas through the heart of Oklahoma and into central Texas for the next three days, said Drew Lerner, president of World Weather Inc., a closely-watched private weather firm.

 

"It's going to be so wet down in some of these areas for awhile, it's going to be hard to get any work done," Lerner said.

 

The Agriculture Department reported harvest was 22% complete as of Sunday, down from 50% at the same time last year and the five-year average of 36%. The recent rains, a hard freeze Easter weekend, disease and other problems have taken a toll on the size and quality of the crop, industry members said.

 

"Every time they open up a door they're finding worse wheat than they had behind the previous door," Tim Hannagan, analyst at Alaron Trading in Chicago, said about producers. "We've got 80% to (harvest), and the market trades fear before fact. The fear is that the next 80% may show the worst of this crop."

 

Uncertainty about the U.S. wheat crop comes as 2007-08 global ending stocks are already pegged at a 30-year low. Statistics Canada put a spotlight on shrinking supplies by lowering its estimate for 2007 wheat plantings.

 

Statistics Canada estimated Canada's 2007 all wheat seedings at 21.701 million acres, down from its April estimate of 23.759 million and from 2006 seedings of 24.249 million. Analysts' pre-report estimates were 22.700 million to 25.600 million.

 

India also announced it was tendering to buy 1 million metric tonnes of wheat, which makes less grain available for the rest of the world, analysts said.

 

 

Kansas City Board of Trade

 

KCBT July wheat traded limit up amid strong commercial buying before trimming gains. Concerns about the hard red winter wheat harvest, India's tender and the lowered seedings estimate for Canada were friendly, a trader said.

 

Kansas' winter wheat harvest continues to be a mixed bag in terms of quality and quantity, the Kansas Wheat Commission and Kansas Association of Wheat Growers said in a joint report Tuesday. The need for custom cutters is becoming urgent as western Kansas fields are ripening, the harvest report said.

 

Producers are probably 30% done with harvest near Halstead, Kan., about 35 miles northwest of Wichita, said Cory Harringtonne of Farmers Cooperative Elevator Co. The number of local bushels is down significantly this year over last year, and producers are having a lot of trouble cutting their grain, he said in the harvest report.

 

 

Minneapolis Grain Exchange

 

Trading of the July/September spread continued to be a feature at MGE, a floor trader said. Front-month contracts traded limit up before trimming gains.

 

The USDA rated 79% of the U.S. spring wheat crop good-to-excellent, a six-percentage-point decline from the previous week. The decrease wasn't much of a concern because the ratings were so high, an analyst said. Warm-hot temperatures and less rainfall in the U.S. Northern Plains during the next seven days will favor developing spring wheat as recent wet conditions have increased diseases, according to DTN Meteorlogix.

 

However, very hot weather could increase stress to wheat in South Dakota, the weather firm said.