July 6, 2006

 

US Wheat Review on Wednesday: Minneapolis grain exchange leads markets higher on health and retirement study concerns

 

 

U.S. wheat futures rose Wednesday on concerns over further deterioration in the hard red spring crop of the northern Plains amid forecasts for hot, dry weather to carry into next week.

 

Basis September contracts, Chicago Board of Trade wheat rose 2 3/4 cents to US$4.04 3/4, Kansas City Board of Trade added 4 1/2 cents to US$5.22 1/4 and Minneapolis Grain Exchange rose 5 3/4 cents to US$5.12 3/4 a bushel.

 

"Crop stress in spring wheat areas will continue," a DTN forecast said.

 

While the Dakotas' spring wheat areas may see cooler temperatures this weekend, hot, dry conditions are expected to return next week, putting additional pressure on the crop that has lost significant ground in the last three weeks.

 

"The weather forecasts are the name of the game, and if you look at wheat the leadership in the complex really is in the Minneapolis market," said Dale Durchholz, commodity analyst at AgriVisor Services in Bloomingtonne, Ill.

 

"The strength there is bleeding over into Kansas City and secondarily into the Chicago market," he added.

 

Twenty percent of the spring wheat crop was poor to very poor in the week to July 2, versus 17% the previous week, a result of drought conditions in South Dakota and abnormally dry soil in much of North Dakota -- the nation's top HRS producer. The HRS crop's good-to-excellent ratings fell to 52%, versus 57% the previous week, the U.S. Department of Agriculture reported Monday.

 

Meanwhile, Midwestern soft red winter growing areas are expected to see mostly dry conditions this week for the harvest, with chances for scattered showers in the west on Sunday, DTN Meteorlogix said.

 

The soft red crop in southern Illinois is in good shape and may be improved over last year's.

 

"We've got a really good crop this year. We had the acres and we also had weather conditions that were reasonably good," Durchholz said.

 

In export news, Japan is seeking 40,000 metric tonnes of U.S. wheat for shipment Sept. 1-30, in a tender to be held Thursday. It also seeks 20,000 tonnes of Canadian and 20,000 tonnes Australian wheat.

 

The Philippines is expected to buy 30,000 tonnes of optional-origin wheat for September shipment on Thursday.

 

Iraq's trade minister reiterated Wednesday that all future wheat trade with Australia is suspended after Australian security personnel killed two of the minister's bodyguards two weeks ago. No future deals will be authorized until Australia apologizes for the killings. Australian officials say they won't apologize until they look at all facts about the incident.

 

At the CBOT, Calyon Financial bought 1,500 September, Tenco bought 500 December, UBS bought 400 December and Citigroup Global Markets bought 300 December. Rand Financial sold 400 September, Man Financial sold 500 September and 100 December, while Iowa Grain sold 300 September.

 

Funds bought a net 1,500 contracts as of 1:30 p.m. EDT.

 

 

KANSAS CITY BOARD OF TRADE

 

KCBT futures closed higher on spillover support from Minneapolis wheat. Most-active September equaled a 4 1/2-week high of US$5.24 and settled just beneath that level at US$5.22 1/4 a bushel.

 

Sixty-five percent of the U.S. winter wheat crop was harvested as of June 2, versus 53% the previous week. Kansas - the nation's largest winter wheat producer - was 95% harvested, the USDA said.

 

ADM sold a net 200 September, J.P. Morgan sold a net 200 September, Man Financial bought 500 September, Prudential Financial bought 600 December and UBS bought 600 December.

 

 

MINNEAPOLIS GRAIN EXCHANGE

 

MGE wheat futures traded to fresh contract highs, but met with late profit-taking to knock the market off its best levels of the day. Still, September closed at a new contract high of US$5.12 3/4 a bushel as weather worries dominate the market and also support Chicago and Kansas City.

 

A Dow Jones Newswires index - which uses a value of 100 for a normal crop - lists the HRS crop at 90.4%, down from 93% the previous week and 108.4% one year ago.

 

The adverse weather is coming at a critical time since much of the crop is in its heading development stage, which determines yields. Nearly all of the South Dakota crop has headed, while 70% of the North Dakota crop has headed.