June 30, 2007

 

US Wheat Review on Friday: Profit-taking erases strong gains

 

 

End-of-the-month profit-taking dragged heavily on U.S. wheat futures Friday after an early rally on a smaller-than-expected government estimate for spring wheat acres, traders said.

 

Chicago Board of Trade July wheat ended 27 cents lower at US$5.82 per bushel, down 10 1/4 cents on the week. CBOT September wheat slipped 26 3/4 cents to US$5.97, and CBOT December wheat closed 22 1/2 cents lower at US$6.10 1/2.

 

Kansas City Board of Trade July wheat ended down 3 3/4 cents at US$5.96 1/2, KCBT September wheat closed down 12 1/4 cents at US$5.95, and KCBT December wheat finished down 4 1/2 cents at US$6.18 1/4.

 

Minneapolis Grain Exchange July wheat settled 4 cents higher at US$6.23, MGE September wheat rose 2 1/4 cents to US$6.24 1/4, and MGE December wheat finished up 1 1/2 cents at US$6.32.

 

Before sliding lower, CBOT July wheat set a new contract high and a fresh 11-year high for a front-month contract when it traded to US$6.32. That exceeded the contract's previous high of US$6.25.

 

Wheat futures climbed in early trading after the U.S. Department of Agriculture released its June acreage and quarterly stocks reports. The agency pegged U.S. spring wheat acres below trade expectations, which was bullish, traders said.

 

Tight global supplies and unfavorable weather around the world, including unneeded rains in the U.S. southern Plains and Europe, remain supportive, traders said.

 

Trading was choppy throughout the day session as weakness in corn and profit-taking weighed on prices. CBOT July wheat traded within a 51-cent range, with the session high at US$6.32 and the session low at US$5.81. CBOT September wheat traded within a 56 1/4-cent range, with the session high at US$6.50 and US$5.93 3/4.

 

Commodity funds sold an estimated 3,000 contracts. In CBOT pit trades, Goldenberg Hehmeyer sold 2,000 September, and Shatkin-Arbor sold 500 September. UBS bought 1,000 September.

 

In other news, deliveries posted against the CBOT July wheat future totaled 1,722 lots. A customer account at Astro Division of UBS Securities was the primary issuer of 1,640 lots, and stoppers were scattered among various firms. The number of deliveries was within trade estimates.

 

 

Kansas City Board of Trade

 

KCBT July wheat traded limit up, 30 cents higher, shortly after the opening. The contract traded within a range of 35 1/4 cents and ended up 25 3/4 cents on the week.

 

There was support from ongoing concerns about persistent rains in the southern Plains, traders said. Portions of central and northern Texas are already approaching their annual average rainfall totals with five months left until the end of the year, according to T-Storm Weather.

 

A corridor from Wichita, Kan., south to central Texas remains in line for moderate to heavy rain during the next three days, DTN Meteorlogix said in a forecast. The persistent rainfall will further hurt wheat production and quality, the weather firm said.

 

Western areas of the southern Plains are in store for generally dry conditions, which will be beneficial for harvest, Meteorlogix said. Temperatures will be variable in the region, the firm said.

 

No deliveries were posted against the KCBT July futures, which was not a surprise, traders said.

 

 

Minneapolis Grain Exchange

 

MGE July and September wheat traded limit up, 30 cents higher, in early trading on a lower-than-expected spring wheat acreage estimate from the USDA, floor traders said. MGE July wheat traded in a 29-cent range from, from US$6.20 to US$6.49.

 

MGE July wheat ended up 23 cents on the week.

 

The USDA report estimated spring wheat plantings at 13.144 million acres, below the average pre-report analyst estimate of 13.835 million and the agency's March estimate of 13.808 million. In 2006, spring wheat was seeded on 14.899 million acres.

 

The USDA put all wheat acres at 60.505 million, above the average analyst estimate of 60.35 million and the agency's March estimate of 60.303 million. Durum wheat was pegged at 2.225 million acres, above the average trade estimate and the USDA's March estimate.

 

Concerns about quality and protein levels in HRW wheat in the southern Plains added premium to spring wheat contracts at MGE, an analyst said. Wheat futures will not "fall apart" until the spring wheat harvest is complete in the fall because the markets need to know what the Northern Plains will produce, said Louise Gartner, analyst with Spectrum Commodities in Beavercreek, Ohio.

 

The USDA estimated U.S. wheat stocks as of June 1 at 456 million bushels, above the average analyst estimate of 422 million. The USDA's March 1 estimate for quarterly wheat stocks was 856 million and the June 1, 2006, estimate was 571 million.

 

In other news, the Canadian Wheat Board raised its monthly price projections for most grades of wheat and durum that will be sold during the upcoming 2007-08 crop year, which begins Aug. 1. World weather conditions during the past month along with tight global supplies have created significant price support, the CWB said.

 

No deliveries were posted against the MGE July futures.