July 19, 2006

 

US Wheat Review on Tuesday: Mixed close; firm basis supports CBOT

 

 

U.S. wheat futures closed mixed Tuesday, with Chicago leading the way higher on expectations for strong export demand and Minneapolis and Kansas City steady to weak.

 

Basis September contracts, Chicago Board of Trade wheat settled 5 cents higher at US$3.98, Kansas City Board of Trade lost 1/2 cent to US$4.90 1/4 and the Minneapolis Grain Exchange shed 2 1/4 cents to US$5.00.

 

Despite drought continuing to strip U.S. spring wheat of production potential, evidenced by a full 32% of the crop in poor to very poor condition as of Sunday, Minneapolis couldn't muster any strength as weak technicals pressured the market.

 

Late buying took the market off its lows, but MGE wheat still ended with losses.

 

KCBT wheat held mostly steady to weaker ground through much of the session and was somewhat tied to the weak trade in Minneapolis and losses in CBOT corn and soybeans, a trader said.

 

Chicago wheat, meanwhile, climbed on ideas that soft red winter exports will pick up soon, based on a 10-cent rise in Louisiana Gulf CIF values since last Friday. Exports are expected to approach 1.4 million bushels and more than double the previous week, Dow Jones Newswires reported.

 

Technicals were supportive in CBOT September wheat, where prices rose above 100-day and 20-day moving average support. Resistance was met, however, just beneath the US$4.02 3/4, 40-day moving average.

 

Speculative and fund buying also supported Chicago wheat for a total of 3,000 contracts purchased as of 1:30 p.m. EDT.

 

Citigroup Global Markets bought 1,000 Dec and Goldenberg Hehmeyer bought 1,000 September, J.P. Morgan bought 800 September, and O'Connor bought 600 December. Man Financial sold 700 September and Rand Financial sold a net 300 December.

 

 

KANSAS CITY BOARD OF TRADE

 

KCBT September wheat closed slightly lower on spillover weakness from lower MGE prices and weak technicals. The contract traded to a three-week low before light buying entered and lifted prices to a midrange close.

 

U.S. winter wheat is 80% harvested, as Illinois, Indiana and Ohio wrap up their activities. Illinois and Indiana are 96% and 94% harvested, respectively, while Ohio is 80% cut, the USDA said in its weekly report.

 

ADM was an early seller of 1,200 September, Man Financial sold a net 200 September and 400 December, Frontier Futures bought a net 200 September and UBS bought 200 December.

 

 

MINNEAPOLIS GRAIN EXCHANGE

 

Minneapolis hard red spring wheat closed lower - despite a report showing the crop has further deteriorated to a full 32% now considered poor to very poor - as drought took its toll on the crop.

 

The key producing state of North Dakota now sees 34% of its spring wheat in poor or very poor condition, while 23% of Montana's crop is in the same category.

 

The extreme heat and dryness is also speeding crop maturity, which impedes proper development and yields suffer.

 

John Enz, North Dakota State Climatologist in Fargo, told Dow Jones Newswires on Tuesday that it may be "too late" for the state's spring wheat crop, as soil moisture continues to deplete and nearly all of the wheat is in its critical heading stage.

 

Temperatures are expected to decline a bit later this week and bring a chance of scattered showers to the northern Plains, but the forecasts do not suggest any drought-busing rain patterns.

 

Weak technicals were cited as the main pressuring influence in the MGE market, however, which carried over from Monday. Minneapolis closed weaker but off the lowest levels of the session.