July 21, 2007

 

US Wheat Review on Friday: Slips mostly lower on profit-taking

 

 

U.S. wheat futures closed mostly lower Friday on profit-taking and as the markets faced uncertainty about whether expectations for strong global demand will materialize, analysts said.

 

Chicago Board of Trade September wheat slipped 3 3/4 cents to US$6.16 1/4 per bushel, down 4 1/2 cents on the week. CBOT December wheat closed 1 3/4 cents lower at US$6.33 1/2, down 1 3/4 cents on the week.

 

Kansas City Board of Trade September wheat ended down 3 1/4 cents at US$6.03 1/2, down 5 1/2 cents on the week. KCBT December wheat fell 2 3/4 cents to US$6.18 3/4, down 8 1/2 cents on the week.

 

Minneapolis Grain Exchange September wheat finished up 1/2 cent at US$6.20, down 10 cents on the week. MGE December wheat rose 3/4 cents to US$6.33, down 6 1/4 cents on the week.

 

Prices leapt higher in early activity with support from a move to record high prices in Paris wheat futures, traders said. Paris milling wheat futures traded on Liffe rose on fears about European Union crop weather damage and on speculative buying, they said.

 

The gains could not be sustained, however, as market participants took money off the table before the weekend, traders said. It seems as though traders are not willing to push above contract highs without more indications that the U.S. will see unexpected export business, an analyst said.

 

Recent export business has been "very good" but may have already been included in the U.S. balance sheet, said Shawn McCambridge, an analyst with Prudential Financial in Chicago. The U.S. is temporarily considered to be the primary source for countries looking to buy significant amounts of wheat, but there is uncertainty about whether high prices will scare off importers, he said.

 

"It just seems like we're trying to feel this market out a little bit to see if end users are going to use as much wheat as we think they're going to," McCambridge said.

 

The U.S. cashed in on tight global supplies this week with a sale of 300,000 tonnes of soft red wheat to Egypt. Egypt, one the biggest importers of wheat on a global scale, is known to be extremely price conscious and likely made the purchase because its grain buyers expect a further deterioration in world production numbers, analysts said.

 

Specifically, Australia's western wheat belt is hurting for rain, and Canada may suffer losses from a heat wave after producers planted a smaller crop. Analytical report Strategie Grain this week lowered its 2007-08 E.U. soft wheat crop forecast by 2.9 million metric tonnes from last month's projection amid overly wet conditions in Western Europe.

 

The U.S. has run into crop trouble of its own. Persistent rains in the Southern Plains this spring lowered the quality and quantity of hard red winter wheat, which is used to make bread.

 

In Ohio, which produces soft red winter wheat, early reports peg average yields at 62-63 bushels per acre, on track with the U.S. Department of Agriculture's yield forecast of 64 bushels, said Pierce Paul, an Ohio State University plant pathologist. SRW wheat is used for pastries.

 

There were concerns about crop losses in Ohio after wheat was hit with a hard spring freeze and dry summer conditions that shortened the grain fill period. However, it appears the crop turned out better than expected, Paul said in a press release. Harvest was 99% complete as of Sunday, according to the USDA.

 

 

Kansas City Board of Trade

 

KCBT wheat futures sunk lower amid profit-taking, a KCBT floor trader said. Long-term declines aren't expected, as wheat seems to have strong underlying support from tight supplies, he said.

 

While market participants don't seem to want to buy at the top end of wheat's trading range due to uncertainty about demand, they don't seem to want to sell aggressively at the low end of the trading range either, McCambridge said. The markets are taking a wait-and-see attitude to find out whether the U.S. is verifying its balance sheet with sales or exceeding expectations, he said.

 

South Dakota's winter wheat harvest is "superb" so far, said Craig Haugaard, a producer marketing specialist with South Dakota Wheat Growers, a grain cooperative headquartered in Aberdeen, S.D. The cooperative's trade territory extends from Aberdeen west to McLaughlin, S.D., south past Huron, S.D., east to Willow Lake, S.D., and north about 50 or 60 miles into North Dakota.

 

The worst yields so far have come in at 57 bushels per acre, with some producers reporting yields of 90-100 bushels per acres, Haugaard said. Test weights average about 62.4 pounds per bushel, with protein levels about 12.4%, he said.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures rose with some support from fears about weather damage to spring wheat in the western North Plains, a floor trader said. Hot, dry conditions have stressed the crop there, he said.

 

Overall, however, developing U.S. hard red spring and durum wheat is in excellent condition, analysts said. Wheat industry members next week will travel across North Dakota, South Dakota and Minnesota to conduct an annual survey of the crops.