August 1, 2007
US Wheat Review on Tuesday: Finishes lower, extending correction
U.S. wheat futures skidded lower Tuesday on profit-taking, extending a correction to recent gains, traders and analysts said.
Chicago Board of Trade September wheat slid 7 1/2 cents to US$6.30 per bushel, and CBOT December wheat closed down 7 3/4 cents at US$6.49. It was the lowest close for both contracts since July 23.
Kansas City Board of Trade September wheat slipped 3 cents to US$6.29, and KCBT December wheat ended down 3 cents at US$6.45. Minneapolis Grain Exchange September wheat finished 6 1/4 cents lower at US$6.27, and MGE December wheat settled 4 1/4 cents lower at US$6.41 1/4.
U.S. wheat futures opened on the defensive, following weakness in Paris and London wheat futures, and stayed under pressure throughout the session, traders said. U.S. futures recently have been looking more to the European trade for direction amid concerns about tight world stocks and global production problems, including crop damage and harvest delays due to wet weather in western Europe, analysts said.
Paris and London wheat futures traded on Liffe fell Tuesday to correct further from last week's rally to historical highs, traders said. Improving harvest weather also eased the bullish sentiment.
The U.S. is "looking at these world markets really closely," said Jason Britt, a broker and analyst at Central State Commodities in Kansas City, Mo.
Europe's major wheat areas will have continued cool temperatures with occasional light to moderate showers through the end of the week, and more "unsettled weather" is possible next week, according to forecasters for DTN Meteorlogix. However, conditions are better than they were last week, the forecasters said.
Going forward, U.S. wheat futures will keep an eye on key global production areas, including Argentina and Australia, Britt said. Remaining wheat planting in Argentina is expected to be "sluggish" this week and next week due to dry and unseasonably cold conditions, T-Storm Weather said.
"I think the next direction in the wheat market is kind of going to be determined by what your overseas markets are doing," Britt said. "If the world (crops) get in trouble, you could see another leg up. If not, you're kind of at the top of the range."
Commodity funds sold an estimated 1,000 contracts at the CBOT. In CBOT pit trades, RJ O'Brien bought 600 Sep, and UBS bought 300 Sep. Fimat sold 300 Sept.
Kansas City Board of Trade
KCBT September wheat ended at its lowest level since July 25. The contract traded to a session high of US$6.30 and a session low of US$6.23.
Wheat trimmed losses at the end of the session with market-on-close buying, a KCBT floor broker said. Fimat bought about 300 December on the close, he said.
Overall, activity was "pretty quiet" as the market continued its correction from Monday, when KCBT September wheat closed down 12 cents at US$6.32, the broker said.
"Wheat needed to correct some more," he said. "We kind of did what we did yesterday."
There was also some intermarket spread trading, with investors buying CBOT and selling KCBT, a KCBT floor trader said.
Minneapolis Grain Exchange
MGE September wheat settled at its lowest level since July 23. The contract traded to a session high of US$6.33 and a session low of US$6.25 1/2.
The U.S. Department of Agriculture's weekly crop progress report showed a decline in the condition of spring wheat, although the drop was not considered a major factor in the day's trading because producers are starting to harvest, analysts said. The agency rated 68% of the crop in good to excellent condition as of Sunday, down seven percentage points from the previous week.
In Montana, 42% of the crop was rated in good-to-excellent condition, down from 62% the previous week. In Idaho, 66% of the crop was seen in good-to-excellent condition, down from 70% a week earlier.
The USDA said 10% of the spring wheat crop was harvested, below the 19% cut at this time last year but above the five-year average of 8%.
