June 29, 2007

 

US Wheat Review on Thursday: Up on exports, pre-report positioning

 

 

Strong export demand, production problems and positioning ahead of a key crop report gave U.S. wheat futures a boost Thursday, traders and analysts said.

 

Chicago Board of Trade July wheat ended up 3 cents at US$6.09 per bushel, CBOT September wheat finished up 2 1/4 cents at US$6.23 3/4 and CBOT December wheat settled 4 1/2 cents higher at US$6.33.

 

Kansas City Board of Trade July wheat climbed 11 1/4 cents to US$6.00 1/4, KCBT September wheat closed up 4 3/4 cents at US$6.07 1/4, and KCBT December wheat finished up 6 1/2 cents at US$6.22 3/4.

 

Minneapolis Grain Exchange July wheat rose 10 cents to US$6.19, MGE September wheat ended 6 1/4 cents higher at US$6.22, and MGE December wheat closed up 9 1/2 cents at US$6.30 1/2.

 

The U.S. Department of Agriculture said export sales for the week ended June 21 totaled 622,800 metric tonnes, above trade estimates of 200,000 to 500,000 tonnes and 15% higher than the previous week. The sales were bullish because they showed high prices have not turned off demand from U.S. wheat, a CBOT floor broker said.

 

Major buyers included Taiwan, which took 247,500 tonnes, Japan, which bought 194,400 tonnes, and Egypt, which bought 161,200 tonnes. The USDA reported commitments of 5.908 million tonnes so far for the current marketing year, which began June 1, compared to 5.007 million tonnes at the same time last marketing year.

 

The stronger-than-expected export data followed solid sales to Egypt and Japan this week, an analyst said.

 

The International Grains Council cut its forecast for the 2007-08 world wheat crop to 614 million tonnes, down 7 million tonnes from last month's estimate. The reduction was largely attributed to a severe drought in Ukraine and parts of Russia.

 

IGC also cut its forecast for the E.U. wheat crop by 1.4 million tonnes to 129.6 million tonnes. IGC said the reduction was due to lower projections for Hungary's and Romania's output, which were partly offset by upward revisions for France and Spain.

 

Strong gains in European wheat futures also gave U.S. wheat futures a boost, an analyst said. Paris-milling wheat climbed to a record high Thursday on tight global stocks and as ongoing rains threatened northern Europe's crop quality and yields, traders said.

 

Paris-based November milling wheat ended up EUR2, or 1.1%, at EUR181 a metric tonne, with 2,510 lots moved. November set an all-time high of EUR181.75/tonne in the second-month chart, surpassing the previous mark of EUR181/tonne set June 14.

 

Commodity funds bought an estimated 2,000 contracts. In pit trades, RJ O'Brien sold 500 December, while FC Stonnee and Man Financial each sold 500 September. Rosenthal spread 500 July/September.

 

In other news, first notice day for July wheat contracts is Friday, which means it is the first day on which notices of intention to deliver actual commodities against futures market positions can be received. Deliveries against the CBOT July contract are expected to be from 1,000 to 2,000 contracts, with most estimates in the upper level of the range, floor traders and analysts said.

 

 

Kansas City Board of Trade

 

Strong export sales combined with ongoing concerns about excessive wetness in the southern Plains to support prices, a KCBT floor trader said. Persistent moisture continues to delay the hard red winter wheat harvest and damage the crop, he said.

 

Rainfall is hindering wheat quality and cutting progress from south-central Kansas south to north-central Texas, according to DTN Meteorlogix. That corridor had another 1.5 inches of rainfall Wednesday and will remain wet during the balance of the week, the weather firm said in a forecast.

 

Additional showers will cover central and eastern Oklahoma and Texas on Friday, with eastern areas in this rain belt seeing more moisture on Saturday, Meteorlogix said. Rains could be locally heavy.

 

A better round of weather is expected over western Kansas through southwestern Nebraska, according to Meteorlogix. Drier and hotter conditions are in place, which will allow good wheat harvest progress and minimize crop quality losses, the firm said.

 

Deliveries against the KCBT July wheat contract Friday are expected to be "light to nonexistent," a KCBT floor trader said. Deliveries should not be "near as great" at the KCBT as the CBOT because of hard red winter wheat harvest delays and concerns about quality issues due to excessive rain, added Joe Victor, vice president of marketing at Allendale.

 

 

Minneapolis Grain Exchange

 

The July/September spread remained a feature of the day session, a floor trader said. There was little selling, he added.

 

Ideas that the heavy rains in the southern Plains are damaging HRW wheat quality are adding premium to spring wheat, an analyst added. The ongoing rainfall in HRW wheat areas is sparking concerns about yield and protein levels, he said.

 

Traders were waiting for the USDA to issue its June acreage and quarterly grain stocks reports. Positioning going into the reports supported gains, they said. The reports are due at 8:30 a.m. EDT Friday.

 

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.

 

Deliveries against the MGE July wheat contract are expected to be around 400-600 contacts during the first three days, a floor trader said.