July 1, 2006

 

US Wheat Review on Friday: Firms on short-covering ahead of weekend

 

 

U.S. wheat futures rose Friday, supported by short-covering ahead of the weekend and the inability of the market to break very hard despite a choppy session, sources said.

 

Basis September contracts, Chicago Board of Trade wheat gained 1 cent to US$3.96, Kansas City Board of Trade rose 1 1/4 cents to US$5.09 and MGE wheat gained 5 1/2 cents to US$4.93 a bushel.

 

CBOT wheat also found spillover support from a rally in the soybean and corn pits, an analyst says.

 

"It was kind of choppy, indecisive day," said Shawn McCambridge, senior grains analyst at Prudential Financial in Chicago.

 

"I think we got some spillover strength from the Minneapolis market and also from the solid gains in the corn and bean markets," he said.

 

The fact that prices broke lower for a time, but failed to extend too far to the downside or break any meaningful support, encouraged short-covering.

 

September hit a three-week high of US$3.99 1/2 on the open and closed just beneath that level as late buyers entered the market.

 

Crop concerns amid drought conditions in northern Plains hard red spring growing areas - specifically South Dakota - supported the Minneapolis market and also helped firm CBOT and KCBT prices.

 

Acreage and stocks reports from the U.S. Department of Agriculture were considered mostly neutral for the markets, McCambridge said.

 

The USDA projects all-wheat acres at 57.873 million, above the March estimate of 57.128 million and in-line with pre-report expectations. Spring wheat seedings were 14.595 million, versus 13.899 million acres in March, while durum seedings were 1.855 million, versus 1.825 million in March.

 

Wheat stocks as of June 1 were 568 million bushels, up from the June 9 estimate of 547 million and last year's 540 million.

 

Friday also was first notice for the July U.S. futures contracts, with CBOT deliveries totaling 1,552 and matching expectations.

 

At the CBOT, R.J. O'Brien sold 2,500 September, Goldenberg Hehmeyer sold 1,000 September and J.P. Morgan and Prudential Financial each sold 500 September. Citigroup Global Markets and O'Connor each bought 500 September, while ABN Amro bought 300 contracts.

 

ADM spread 700 September/December at 18 1/2 cents.

 

Funds sold a net 4,000 contracts as of 1:30 p.m. EDT.

 

 

KANSAS CITY BOARD OF TRADE

 

KCBT wheat futures hit nearly a five-week high and were bolstered near session's end on short-covering ahead of the weekend.

 

The market was influenced by the HRS crop concerns and the rally in CBOT corn and soybeans, a trader said. The Kansas hard red winter harvest is rapidly coming to a close.

 

Some price pressure resulted from a heavy 1,557 delivery notices posted on first-notice day.

 

Prudential-Financial, Man Financial and J.P. Morgan each bought around 600 September contracts, while ADM sold 800 September.

 

Country Hedging was featured on the July/September and the September/July spreads at 10 1/2-10 3/4 cents.

 

 

MINNEAPOLIS GRAIN EXCHANGE

 

MGE wheat futures led the markets higher and set a new contract top in the process, amid the drought conditions and crop concerns in the northern Plains underpinning prices.

 

"The emphasis is really on production potential for the hard red spring crop right now," McCambridge said.

 

Temperatures climbed to 101 Fahrenheit in eastern Montana and the western Dakotas. A few showers over the weekend will help eastern areas, but the majority of the region will be dry, DTN's forecast said. Temperatures will continue above to much above normal, further stressing the hard red spring crop.

 

The USDA has lowered its HRS good-to-excellent ratings by 7 percentage points in the last two weeks in response to the hot, dry weather during the critical heading development stage.

 

MGE September set a new high of US$4.95 1/2 a bushel.