July 18, 2007

 

US Wheat Review on Tuesday: Backpedals from early rally on egypt sale

 

 

U.S. wheat futures closed mostly lower Tuesday as an early rally on export demand gave way to spillover pressure and profit-taking, analysts and traders said.

 

Chicago Board of Trade September wheat slipped 1/2 cent to US$6.01 1/4 per bushel, and CBOT December wheat finished down 3/4 cent at US$6.17 1/4. Kansas City Board of Trade September wheat dropped 7 3/4 cents to US$5.86, and KCBT December wheat settled 7 1/2 cents lower at US$6.01 1/2. Minneapolis Grain Exchange September wheat ended 6 1/4 cents lower at US$6.07, and MGE December closed 3 3/4 cents lower at US$6.21 1/2.

 

Profit-taking and a sell-off in CBOT corn and soybeans pulled wheat futures into negative territory after prices surged on a sale to Egypt, said Tom Leffler, owner of Leffler Commodities in Augusta, Kan. Egypt's state-owned General Authority for Supply Commodities bought 300,000 tonnes of U.S. soft red wheat, which is traded at the CBOT.

 

CBOT wheat futures led the upside and lent early support to the other markets, with CBOT September wheat climbing as high as US$6.18 3/4 during the day session, analysts said. CBOT December wheat traded as high as US$6.33 1/2.

 

"I think the Egypt wheat sale is what gave wheat all its upside," Leffler said.

 

Wheat futures were due for a fall because prices are higher than last year and the U.S. is expected to produce more grain, Leffler said. CBOT September wheat a year ago closed at US$3.98 per bushel.

 

The U.S. Department of Agriculture estimates 2007 all wheat production will be 2.138 billion bushels, up from 1.812 billion in 2006. U.S. all winter wheat production this year is seen at 1.562 billion bushels, up from 1.298 billion in 2006.

 

"I really think that it's hard to justify the wheat at the price level we're at right now," Leffler said.

 

In other news, Western Australia appears to be on track to receive less precipitation in the next six to 10 days than was previously expected, Cropcast said in a forecast. Only minimal totals are expected during that time frame, which is "not good news for the dry grounds" in the region, the weather firm said.

 

 

Kansas City Board of Trade

 

Pressure on CBOT corn and soybeans sparked spillover selling of KCBT wheat, a KCBT floor trader said. The Egyptian purchase of soft red wheat also prompted some traders to buy CBOT futures and sell KCBT hard red wheat futures, a KCBT floor broker said.

 

Losses at KCBT triggered some sell stops, which drove prices deeper into negative territory, the broker said. There was some light fund selling, he said.

 

Growing wheat supplies are also bearish, an analyst said. Winter wheat harvest was 70% complete as of Sunday, compared to the five-year average of 73%, according to the USDA.

 

 

Minneapolis Grain Exchange

 

The USDA's spring wheat rating slipped two points this week to 76% good to excellent, according to the USDA. That is its lowest rating of the year, but it is common for the rating to slowly decline into the harvest, said Bill Nelson, associate vice president of AG Edwards & Sons.

 

The rating is sharply up from the 10-year average of about 61% and from last year's rating of 34%, Nelson said in a market comment. Among the major states last week, South Dakota was the only state to better its ratings and jumped five percentage points, he noted.