June 28, 2007

 

US Wheat Review on Wednesday: Profit-taking follows new contract highs

 

 

U.S. wheat futures climbed to new contract highs Wednesday before profit-taking and heavy losses in the neighboring corn market pressed on prices, traders and market analysts said.

 

Chicago Board of Trade July wheat settled 2 1/2 cents lower at US$6.06, CBOT September wheat slipped 4 1/2 cents to US$6.21 1/2, and CBOT December wheat finished down 5 1/2 cents at US$6.28 1/2.

 

Kansas City Board of Trade July wheat closed 1/2 cent higher at US$5.89, KCBT September wheat rose 4 1/2 cents to US$6.02 1/2, and KCBT December wheat finished up 4 cents at US$6.16 1/4. Minneapolis Grain Exchange July wheat tumbled 11 cents to US$6.09, MGE September wheat closed 3 1/4 cents higher at US$6.15 3/4, and MGE December wheat closed down 1/4 cent at US$6.21.

 

Before trimming gains, CBOT July wheat set a fresh 11-year high for a front-month contract of US$6.25 per bushel, exceeding the previous high of US$6.18 1/2. CBOT December wheat set a new contract high of US$6.46, exceeding the previous high of US$6.43 1/2 set Tuesday.

 

Wheat futures felt an early boost from a sale of 55,000 metric tonnes of U.S. soft red wheat to Egypt for shipment July 21-31, CBOT floor traders said. Egypt also bought 60,000 tonnes Russian wheat in the tender.

 

An Iraqi tender for thousands of tonnes of hard wheat for delivery in July and August provided extra support, traders said. A tender document didn't say how much wheat Iraq intended to buy, but an Iraqi trader familiar with the Grain Board of Iraq said Baghdad needed at least 1 million tonnes of wheat for the rest of this year.

 

Wheat could not hang on to strong gains, however, as market participants took profits ahead of the release of the U.S. Department of Agriculture's June acreage and quarterly stocks report, said Jason Britt, a broker and analyst at Central State Commodities. The report is due out at 8:30 a.m. EDT (1230 GMT) Friday.

 

"There are some ideas of 'Let's pull some money off the table before the report'," Britt said.

 

The USDA is expected to increase its estimate for 2007 spring wheat plantings slightly in the acreage report, analysts said. The average analyst estimate for spring wheat acreage was 13.835 million acres, a modest increase from the USDA's March estimate of 13.808 million and below 2006 seedings of 14.899 million.

 

The report is also expected to show a slight increase in durum and all wheat acres and smaller wheat stocks as of June 1, according to a Dow Jones Newswires survey of analysts. The average analyst estimate for quarterly stocks was 422 million bushels, down from the USDA's March 1 estimate of 856 million and the June 2006 estimate of 571 million.

 

Profit-taking also came before the end of the month, an analyst said. Commodity funds sold an estimated 4,000 contracts. In pit trades, Fimat bought 500 September and sold 400 December and 300 September. Man Financial sold 800 September, and RJ O'Brien sold 800 December. Shatkin-Arbor sold 600 September, while JP Morgan and UBS each sold 400 September.

 

Sharp losses in CBOT corn were another negative factor for wheat, analysts said. CBOT September corn ended down 13 1/4 cents at US$3.53 3/4 on technical selling and bearish weather forecasts.

 

"The corn was a drag on everything," Britt said.

 

Looking forward, trading activity Thursday will likely depend on what news comes out overnight, Britt said. Activity is expected to be choppy with some positioning possible before the report comes out and the month ends, he said.

 

The USDA on Thursday is scheduled to release weekly export sales data for the week ended June 21. Trade estimates call for wheat sales to be 200,000 to 500,000 metric tonnes.

 

 

Kansas City Board of Trade

 

Forecasts for more rain and new hard red winter wheat harvest delays in the U.S. southern Plains are fundamentally bullish for KCBT wheat, but the news is "getting a little bit stale," Britt said.

 

No notable change is expected to a pattern of persistent rainfall in the southeastern Plains during the next 10 days, Cropcast said in a forecast Wednesday. There is a nearly daily chance for rainfall in the southeastern 15% of the HRW wheat belt that will continue to slow harvest and increase disease threats, flooding concerns and lodging risks, the private weather firm said.

 

Occasional harvest delays will also affect wheat areas farther north, but rains there will be much more intermittent and delays will be shorter lived than in southern areas, Cropcast said. In the wettest areas of central Oklahoma and central Texas, rain totals of 6-12 inches have been common so far this month, with an additional 3-6 inches fairly likely during the next 10 days, according to Cropcast.

 

T-Storm weather reported wetter-than-desired weather remains probable for much of Oklahoma and central and eastern Texas during the upcoming week. Any heat in the region should trigger new thunderstorms, although western Kansas should see considerably drier and warmer weather, the weather firm said.

 

 

Minneapolis Grain Exchange

 

MGE July wheat set a new contract high of US$6.31, exceeding the previous high of US$6.30 set Tuesday.

 

The July/September spread remained a focus of the day session, with an estimated 1,000 contracts traded, an MGE floor broker said. Losses in MGE July wheat were exaggerated on the close, he said.

 

Wednesday morning news about Egyptian and Iraqi tenders and poor U.S. HRW wheat harvest conditions was seen as bullish, the trader said. There was a "steady pace" of floor activity throughout the day, he said.