August 3, 2007

 

US Wheat Review on Thursday: Modest gains, despite big export sales

 

 

U.S. wheat futures ended modestly firmer Thursday but were unable to climb sharply higher, despite weekly export sales that were described as "monstrous" and "explosive."

 

Chicago Board of Trade September wheat rose 5 3/4 cents to US$6.41 3/4 per bushel, and CBOT December wheat closed 7 1/2 cents higher at US$6.63 1/2. Kansas City Board of Trade September wheat finished 2 cents higher at US$6.34 1/2, and KCBT December wheat settled 3 cents higher at US$6.50 3/4. Minneapolis Grain Exchange September wheat closed up 4 1/2 cents at US$6.36 1/2, and MGE December wheat finished up 4 3/4 cents at US$6.50 3/4.

 

The U.S. Department of Agriculture said export sales for the week ended July 26 were 1.74 million metric tonnes, 53% above the prior four-week average. Trade estimates called for sales of 450,000 to 1.2 million tonnes.

 

Major buyers included the Philippines, which took 241,000 tonnes; Iraq, which bought 200,000 tonnes; and Morocco, which bought 111,900 tonnes. Unknown destinations bought 447,700 tonnes.

 

Traders and analysts called the export business "explosive" and "monstrous" before the markets opened and said the sales were especially impressive considering it was the second consecutive week of strong sales.

 

For the week ended July 19, export sales totaled 2.08 million metric tonnes, the highest since June 1996, according to the USDA. Last week, however, the export news pushed CBOT September wheat to trade limit up, or 30 cents higher, and wheat futures to set fresh contract highs before closing with solid gains.

 

It was "disappointing" that the markets did not rally in a similar way Thursday, said Tom Leffler, owner of Leffler Commodities in Augusta, Kan.

 

"I'm really disappointed today in the performance of the wheat market," Leffler said. "I thought these numbers were pretty impressive. You're not seeing much follow through on that kind of news. Maybe we're seeing more signs of the market getting a little toppy."

 

London- and Paris-based wheat futures traded on Liffe finished higher Thursday in reaction to gains in U.S. wheat prices and as light rains again delayed harvesting. Rain totals were light in parts of Germany and the U.K., and warmer, drier weather is expected to favor harvest over the coming days.

 

Strength in the European wheat markets created a supportive tonnee for U.S. wheat futures in early activity, a CBOT floor broker said.

 

"Europe's wheat harvest continues to be stymied by wet weather," DTN Meteorlogix said.

 

 

Kansas City Board of Trade

 

KCBT wheat futures pushed higher in early trading on bullishness about strong export demand but later trimmed gains on profit-taking, a KCBT floor trader said. Spillover strength from CBOT corn and soybeans also gave wheat a boost, although neither market "ended up really going anywhere" for the day, he said.

 

Looking ahead, the trade will be looking out for crop production estimates from private analytical firm Informa Economics, an analyst said. Informa's estimates are expected Friday morning.

 

FC Stonnee on Wednesday pegged 2007-08 U.S. corn yield below the USDA's most recent estimates, and market participants want to see whether Informa verifies FC Stonnee's numbers. If Informa agrees with FC Stonnee's lower corn yield estimate, that could push CBOT corn prices higher and may cause some unwinding of the wheat/corn spread, an analyst said. That would put pressure on wheat prices.

 

 

Minneapolis Grain Exchange

 

There may have been some pressure on prices from strong early spring wheat yields in the U.S. northern Plains, Leffler said.

 

Preliminary hard red spring wheat harvest reports in North Dakota indicate protein levels of 13%-15% and test weights ranging from 60-66 pounds per bushel, the North Dakota Wheat Commission said. Yields have been above normal, ranging from 40-60 bushels per acre, the commission said in a harvest report.

 

"This is very preliminary data, based on the early harvested crop, and will likely vary as harvest progresses," the commission said.

 

North Dakota's spring wheat harvest was 6% complete as of Sunday, according to the USDA.