July 10, 2006

 

US Wheat Outlook on Monday: Up 1-2 cents on mostly dry north plains

 

 

Mostly dry conditions this weekend over hard red spring growing areas of the northern Plains are sparking calls for higher wheat futures, sources said Monday.

 

Firmer opening calls for corn and soybeans are also expected to lend support to the wheat market.

 

In overnight trade basis September contracts, Chicago Board of Trade wheat was 1 3/4 cents higher at US$4.00, Kansas City Board of Trade was 1 cent lower at US$5.05 3/4 and Minneapolis Grain Exchange was 5 cents higher at US$5.15 a bushel.

 

The gains are being led by Minneapolis hard red spring futures, as hot, dry conditions continued over the northern Plains and drought there is expected to worsen. Drought already affecting major portions of the Dakotas, Nebraska, Wyoming and Iowa is expected to continue and expand through September to include all of those states, in addition to eastern Montana and most of Minnesota, the U.S. Climate Prediction Center said.

 

These areas make up the heart of the HRS belt, and that region is already suffering from drought or abnormally dry conditions.

 

While southern and eastern areas of the HRS belt saw sprinkles and scattered showers over the weekend, the rest of the area was dry. High temperatures were in the mid- to upper-90s Fahrenheit, DTN Meteorlogix said. Scattered showers are possible on Tuesday, with dry conditions or a few light showers on Wednesday. Above- to much-above-normal temperatures are expected to continue stressing the crop, however.

 

Market participants are concerned that drought will hurt the HRS crop, after drought already slashed production of hard red winter wheat on the southern Plains this year.

 

Informa Economics last Friday pegged the U.S. spring wheat crop at 475 million bushels, compared to an average of 496 million bushels found in a Dow Jones Newswires survey and down from last year's production of 504 million bushels.

 

The U.S. Department of Agriculture is scheduled to issue on Wednesday its July crop production and supply/demand tables, which will include the first estimate of the spring wheat and durum crops.

 

Meanwhile, 141 delivery notices were posted against CBOT July wheat; Dowd Wescott stopped 61, ABN Amro stopped 41, Iowa Grain stopped 36 and Kottke stopped three.

 

At the KCBT, seven notices were posted, with J.P. Morgan stopping them. No delivery notices were posted Monday at the MGE.

 

Non-commercial traders, essentially the funds, increased short wheat futures positions at the CBOT by 7,642 to 76,637 contracts in the week ended July 3, the Commodity Futures Trading Commission's Commitments of Traders report shows. Fund shorts now account for 16.7% of open interest. Funds also increased long futures positions by 1,072 to 70,206 contracts, which comprise 15.3% of open interest.

 

At the KCBT, non-commercial traders increased long wheat futures positions by 5,443 to 70,435 contracts, or 43.2% of open interest, while shorts make up just 3.7% of the market. Funds also increased long futures positions at the MGE by 895 to 17,688 contracts, or 34.5% of open interest, versus the shorts, which comprise 1.7% of open interest.

 

In news, winter crops in Australia's New South Wales are nearly planted, with 81% having been sown, but more rain is need to promote growth. Rains fell June 10-11, ending a three-month dry spell across the state, though soaking rains are needed to boost crop establishment and build soil moisture, a state report said.

 

China's wheat supplies are expected to surpass demand by about 3.5 million metric tonnes in the 2006-07 marketing year because of a good 2005-06 harvest, an analyst told Dow Jones Newswires Monday. Wheat stocks are expected to rebound as a result, after declining for six years since 1999.

 

China is expected to produce 8% more wheat in 2006-07 than it did last year.

 

Syria tendered to sell 100,000 metric tonnes of Syrian wheat in a tender that closes July 17. The wheat is set for shipment Aug. 15 to Oct. 15, an official told Dow Jones Newswires. Syria is also looking to sell 50,000 tonnes of wheat for July 15 to Sept. 15 shipment.

 

India is looking to import 25,000 to 50,000 tonnes of wheat for immediate shipment in a tender that closes July 17.