July 7, 2007

 

US Wheat Review on Friday: Closes up on position-squaring, spillover

 

 

U.S. wheat futures rose Friday on spillover support and position-squaring ahead of the weekend, analysts said.

 

Chicago Board of Trade September wheat finished up 6 cents at US$6.10 per bushel, up 13 cent on the week. CBOT December wheat ended up 6 1/2 cents at US$6.22 1/2, up 12 cents on the week.

 

Kansas City Board of Trade September wheat closed 3 1/2 cents higher at US$6.02 1/2, up 7 1/2 cents on the week. Minneapolis Grain Exchange September wheat ended 4 1/4 cents higher at US$6.19 1/4, down 5 cents on the week.

 

Wheat futures felt some borrowed strength from gains in the neighboring CBOT corn and soybean markets, which finished higher amid forecasts for drier weather in the Midwest, analysts said. Nervous market participants also didn't want to go home holding short positions for the weekend, said Shawn McCambridge, analyst with Prudential Financial in Chicago.

 

Wheat futures traded lower and near unchanged for much of the session before pushing into positive territory late in the day. Trading was mostly quiet, with some market participants sitting on the sidelines after recent volatility, a CBOT floor broker said.

 

The trade is already looking ahead to the release of the U.S. Department of Agriculture's July supply and demand report, due out July 12, traders said. The report will include updated production estimates for 2007-08 U.S. all wheat, all winter wheat, hard red winter wheat, soft red winter wheat, white winter wheat, other spring wheat and durum wheat, along with updated new crop and old crop carryout estimates.

 

There was little market reaction seen to newly-released U.S. wheat production estimates from private analytical firm Informa Economics, an analyst said. The firm Friday pegged 2007-08 U.S. all winter wheat production at 1.583 billion bushels, down from the USDA's June estimate of 1.610 billion, traders said. Production in 2006-07 was 1.298 billion bushels.

 

Informa estimated soft red winter wheat production at 359 million bushels, compared to the USDA's June estimate of 341 million, traders said. In 2006-07, SRW wheat production was 390.2 million.

 

Aside from Informa's estimates, there was little fresh news out. The USDA released export sales data for the week ended June 28 of 538,400 metric tonnes, above trade estimates of 200,000-400,000 tonnes. Major buyers included Egypt, which took 118,400 tonnes, Yemen, which bought 48,000 tonnes, and Mexico, which bought 47,400 tonnes.

 

The export sales offered more bullish fuel to the story that the U.S. will have steady demand for wheat amid tight global stocks and world production problems, an analyst said. Rain has been consistent in Europe, for example, through much of June and early July, preventing farmers from really getting harvest started.

 

The largest concerns are in France, where winter grain crops matured before regions further north, traders said. Rain on ripe wheat can lower quality and yields.

 

 

Kansas City Board of Trade

 

Informa pegged hard red winter wheat production at 989 million bushels, down from the USDA's June estimate of 1.032 billion, traders said. In 2006-07, HRW wheat production was 682.1 million.

 

The analytical firm noted heavy rains in the Southern Plains caused HRW wheat production losses, traders said. Those losses were already factored into the market, they said.

 

Hard red winter wheat harvest delays due to wetness are also factored into the market already, a KCBT floor trader said. Cutting conditions will likely improve in the coming days as hot weather covering the western Midwest will be a feature in the Southern Plains, DTN Meteorlogix said.

 

"The drier and hotter conditions will possibly ward off any further loss in crop quality," Meteorlogix said.

 

Weather patterns for next week, however, indicate more thunderstorms are possible across HRW wheat areas, T-Storm Weather said. The best chances for precipitation begins during the middle of next week, the weather firm said.

 

 

Minneapolis Grain Exchange

 

Informa put 2007-08 U.S. spring wheat production at 520 million bushels, compared to 460 million produced last year, traders said. White winter wheat production was pegged at 235 million bushels, compared to the USDA's June estimate of 219 million. In 2006-07, white wheat production was 225.8 million.

 

Hot, dry weather in the U.S. Northern Plains during the next few days shouldn't damage developing spring wheat, industry member said. Temperatures are expected to climb into the 90s Fahrenheit in much of the region, with Montana seeing highs above 100 degrees, according to forecasts.

 

Only light, scattered showers are expected in the Northern Plains through next week. However, the region is not "critically dry" yet, and there should be enough subsoil moisture to protect wheat from damage, said Drew Lerner, president of World Weather Inc.

 

"The subsoil moisture is there," said Rick Vallery, executive director of South Dakota Wheat Inc., a producers' group. "There's not going to be a problem with any of that."