June 28, 2006

 

US Wheat Review on Tuesday: Rallies as hoare research software condition worsens

 

 

U.S. wheat futures rallied Tuesday as worsening conditions for hard red spring wheat on the northern Plains add to the woes of the U.S. crop, sources said.

 

Basis September contracts, Chicago Board of Trade rose 8 3/4 cents to US$3.94 1/2, Kansas City Board of Trade rallied 11 cents to US$5.03 1/2 and the Minneapolis Grain Exchange gained 9 3/4 cents to US$4.84 1/2 a bushel.

 

Hard red spring condition fell another 3 percentage points to 57% good to excellent, for a total loss of 10 points in the last two weeks, the U.S. Department of Agriculture reported.

 

Abnormally dry and drought conditions in South Dakota, and North Dakota to a lesser extent, are stressing the crop, of which a respective 83% and 46% has reached a critical stage during which moisture is required for proper filling of the head. The HRW crop this year was cut 18% from 2005 because of drought conditions in the southern Plains. The dryness up north only compounds wheat's problems.

 

"It all has to do with the weather and the lower crop conditions for spring wheat. They're both coming into play," said Jack Scoville, analyst and vice president at Price Futures Group in Chicago.

 

In addition, forecasts point to continued hot, dry weather in the northern Plains that is expected to further stress the crop, he added.

 

The combination of the lower crop ratings and continued hot, dry conditions of the northern Plains spurred a gap-higher open in all three markets.

 

In export news, Japan is seeking 16,000 tonnes of U.S. hard red winter, 20,000 of western white and 24,000 tonnes of dark northern spring wheat in a Thursday tender. The wheat is for Aug. 1-31 shipment. Japan is also seeking 20,000 tonnes of western red spring from Canada and 20,000 soft white from Australia.

 

Most active September closed at US$3.94 1/2 - its strongest closing level since June 8 - and earlier in the session reached a US$3.98 1/2 two-week high.

 

ABN Amro bought 1,500 September, Calyon Financial and R.J. O'Brien each bought 500 September, Man Financial bought 300 September, Citigroup Global Markets bought 200 September and 100 December, while O'Connor bought 200 September.

 

Fimat and Refco each bought a net 100 September.

 

Funds were active participants and purchased a net 3,500 CBOT contracts as of 1:30 p.m. EDT.

 

 

KANSAS CITY BOARD OF TRADE

 

KCBT wheat futures led the way higher, with fund buying supporting the gains.

 

September rallied to a three-week high of US$5.05 during the session and closed just beneath that level at US$5.03 1/2 - its strongest closing level since June 5.

 

The winter wheat harvest continues to progress, at 53% complete nationally. Kansas, the top-producing state, is 81% harvested, despite intermittent showers and thunderstorms last week.

 

No further threats to the harvest are expected with little chance for showers this week, a trader said.

 

Overall, the 2006 winter wheat crop is higher quality than normal, with drier, heavier and cleaner conditions cited, the U.S. Wheat Associates said in a report. While protein is abundant, baking quality of that protein is lower compared to last year, however.

 

ADM bought 400 September and 300 December, Frontier Futures bought 400 July and 300 December, FC Stonnee bought 600 September and 300 July 2007, J.P. Morgan bought a net 100 September and Prudential Financial bought 300 December, a floor broker said.

 

Frontier Futures sold a net 100 September, FCStonnee sold 300 July and 500 September, Fimat sold 300 December, Man Financial sold a net 100 September and Prudential Financial sold 300 September.

 

The July/September spread traded mainly at 9 3/4 cents. ADM bought 700 and Man Financial bought 400 on the spread.

 

Man Financial also spread 400 September/July contracts and Fimat spread 500 September/December.

 

 

MINNEAPOLIS GRAIN EXCHANGE

 

MGE September wheat futures have strung together solid gains this week, for a total rise of 23 1/4 cents a bushel since Friday's close.

 

The bullish scenario of falling crop condition ratings and forecasts for heat and dryness to continue are underpinning the rally.

 

The USDA will issue its June acreage report Friday. Analysts surveyed expect spring wheat seedings to have risen to an average of 14.563 million acres, versus 13.899 million in the government's March estimate because of the rally in wheat prices this spring, spurred by the short HRW crop.

 

Durum seedings are seen at an average of 2.030 million acres, compared to 1.825 million in March.