July 13, 2007
US Wheat Review on Thursday: Ends mostly higher following USDA reports
U.S. wheat futures finished mostly higher Thursday on strong export demand and as a new government crop report reinforced a bullish outlook, analysts said.
Chicago Board of Trade September wheat fell 1/2 cent to US$6.21 1/2 per bushel, and CBOT December wheat rose 2 3/4 cents to US$6.36 3/4. Kansas City Board of Trade September wheat finished up 7 cents at US$6.11, and KCBT December wheat ended up 8 3/4 cents to US$6.27 3/4. Minneapolis Grain Exchange September wheat settled up 4 cents at US$6.32, and MGE December wheat closed 5 cents higher at US$6.40.
The U.S. Department of Agriculture's July supply/demand and crop production reports cut all winter wheat production from a month ago and reflected tight U.S. carryover. Before the reports came out, wheat already had a positive outlook amid historically tight global stocks and world production problems, said Greg Wagner, analyst with Horizon Ag Strategy.
"There's nothing in the reports that should shut down the fundamentals," Wagner said.
The USDA pegged 2007-08 U.S. wheat carryout at 416 million bushels. The agency in June pegged 2007-08 carryout at 443 million and 2006-07 carryout at 456 million. The average analyst estimate for 2007-08 carryout in a pre-report Dow Jones Newswires survey was 464 million. The range of pre-report guesses was 400 million to 580 million.
The trade was surprised by an increase in the USDA's global wheat carryover, although the increase is "not relevant" to wheat's global supply situation, Wagner said. The increase came as a result of increased production in China, which will not export the wheat, analysts said.
"End users are still in a hand-to-mouth situation," Wagner said. "That's in the U.S. and globally."
The USDA increased its estimate for U.S. wheat exports, which was supportive, traders said. Weekly export sales figures also were strong, they said.
The USDA said export sales for the week ended July 5 were 1.18 million metric tonnes, well above trade estimates of 650,000 tonnes to 850,000 tonnes. Major buyers were Egypt, which took 290,100 tonnes, Guatemala, which bought 105,900 tonnes, Yemen, which bought 103,000 tonnes, and Iraq, which took 100,000 tonnes.
Kansas City Board of Trade
KCBT wheat futures gained on CBOT as the USDA cut hard red winter wheat carryover and production, traders and analyst said. The agency increased soft red winter wheat production and kept SRW wheat carryover high, they said.
Overall, the UDSA lowered its forecast for the U.S. all winter wheat crop to 1.562 billion bushels, a 3% drop from its June estimate, due to heavy rains in the Plains. The average yield prediction for winter wheat was lowered by USDA to 41.6 bushels per acre, down from 43.2 a month ago.
Hard red winter wheat production is now forecast at 964 million bushels, a 7% drop from a month ago. The forecast for soft red winter wheat production was raised 7% to 364 million bushels.
"Hard vs. soft wheat spreads should gain dramatically into days just ahead," Ag Resource Company said in a market comment.
The USDA cut Kansas' production by 60.2 million bushels from last month and Oklahoma's crop by 35.7 million bushels. Texas' crop is now projected to be 7.5 million bushels larger than it was a month ago.
The increase probably comes from strong yields in the Texas Panhandle, said Brent Bean, extension agronomist with Texas A&M University.
"In some parts of Texas, the flooding has been a problem," Bean said. "In the Texas Panhandle, where we grow 50% of the wheat, we haven't had that problem. There are people who will tell you it's the best wheat they've ever seen in the Panhandle."
Minneapolis Grain Exchange
Other spring wheat production was estimated at 498 million bushels, slightly below the average pre-report analyst estimate of 495 million bushels and the 460 million produced in 2006. Durum wheat production was estimated at 79 million bushels, compared to the 53 million produced in 2006 and the average estimate of 77 million.
