July 15, 2006

 

US Wheat Review on Friday: Technical bounce before hot, dry weekend

 

 

U.S. wheat futures closed higher Friday in a technical bounce from recent sharply lower prices and ahead of a weekend that is expected to bring more hot, dry weather to northern Plains' growing areas, sources said.

 

Chicago Board of Trade September wheat rose 2 cents to US$3.97 1/2, Kansas City Board of Trade gained 2 cents to US$4.95 1/2 and the Minneapolis Grain Exchange added 1 3/4 cents to US$5.08 a bushel.

 

Buying interest from key outside markets also sparked speculative buying that supported wheat, corn and soybean futures.

 

"There was buying interest witnessed by the Commodity Research Bureau Index ... and on higher gold prices, silver and energies, so we have that as a positive background," said Bill Nelson, associate vice president at A.G. Edwards in St. Louis.

 

In addition, ideas that Thursday's sell-off in wheat was overdone boosted the futures.

 

Fundamental price support continues to radiate from adverse growing conditions on the northern Plains, Nelson said.

 

Forecasts call for mostly dry and very hot conditions for the drought-afflicted northern Plains heading into the weekend and anticipation that the U.S. Department of Agriculture on Monday will further reduce the hard red spring crop in its weekly condition report.

 

To illustrate the deterioration of the U.S. spring wheat crop, as of July 9, 27% was rated poor or very poor, versus 20% the previous week and 17% in the week to June 25, the USDA said.

 

Meanwhile, farmers continue to harvest soft red winter wheat in the Midwest. Scattered showers and thunderstorms are affecting parts of the eastern Midwest Friday, but conditions are expected to dry for the weekend.

 

In Chicago, funds were equal buyers and sellers as of 1:30 p.m. EDT.

 

ABN Amro, J.P. Morgan and Rosenthal Collins each bought 400 September, and Refco bought 200 September. On the sell side, Shatkin Arbor sold 1,000 September, Calyon Financial sold 500 September, Citigroup Global Markets sold a net 400 December and Goldenberg Hehmeyer sold 400 December.

 

Tenco spread 500 September/December contracts at 19 cents and also spread 500 July/September at 25-33 cents.

 

 

KANSAS CITY BOARD OF TRADE

 

KCBT September wheat futures rose as prices bounced off of Thursday's lows and on ideas that the sell-off was overdone. Extreme heat in the northern Plains also supported prices, a trader said.

 

In early trade, Fimat bought 600 December and UBS bought 200 September. Man Financial sold 100 each September, December and July 2007, while ADM was on both sides of the market.

 

 

MINNEAPOLIS GRAIN EXCHANGE

 

September wheat firmed on a technical bounce from recent lows, with underlying support coming from the adverse weather.

 

Mostly dry conditions with high temperatures reaching 95-105 Fahrenheit are expected in northern Plains HRS growing areas this weekend. Monday will be mostly dry, with the chance for scattered thundershowers in eastern areas on Tuesday. Temperatures are expected to average above to well above normal, DTN Meteorlogix said.

 

The six- to 10-day outlook calls for above-normal temperatures and near- to below-normal rains, which will further stress the crop.

 

September hit a US$4.97 session low but later rebounded to close near the day's high ahead of the weekend.