August 4, 2007

 

US Wheat Review on Friday: Rises on continued crop loss concerns

 

 

Reports of crops losses in Canada and Europe boosted U.S. wheat futures Friday amid continued bullishness about export demand, traders and analysts said.

 

Chicago Board of Trade September wheat rose 8 1/4 cents to US$6.50 per bushel, down 3 1/4 cents on the week. CBOT December wheat ended 5 1/2 cents up at US$6.69, flat on the week.

 

Kansas City Board of Trade September wheat ended up 5 1/4 cents at US$6.39 3/4, and KCBT December wheat finished up 4 1/4 cents at US$6.55. Minneapolis Grain Exchange September wheat settled 6 3/4 cents higher at US$6.43 1/2, and MGE December wheat closed 4 1/2 cents higher at US$6.55 1/4.

 

The Canadian Wheat Board estimated 2007-08 Western Canadian spring wheat production at 16.1 million metric tonnes, down from its June forecast of 16.7 million. In 2006-07, production was 19.1 million.

 

The lower estimate came as a result of several weeks of dryness and record-breaking heat in western Canada, particularly Alberta and Saskatchewan, a CWB official said. Further crop damage from heat and dryness is possible in during the next seven days, according to DTN Meteorlogix.

 

There are also fears about damage from dryness in southwestern Australia, CBOT floor traders said. Serious-to-severe rainfall deficiencies emerged in parts of the region's wheat lands in the three months ended July 31, but there were no deficiencies in wheat lands elsewhere, according to the Australian government's Bureau of Meteorology.

 

"People are realizing we've got a few months of jitteriness ahead of us," a CBOT floor trader said.

 

Volume was relatively low as traders did not want to "stick their neck out" amid uncertainty about global production, a CBOT floor broker added. World wheat stocks are pegged at their lowest level since 1981-82.

 

Commodity funds bought an estimated 1,000 contracts at the CBOT.

 

Wheat futures also felt follow-through support from bigger-than-expected weekly export sales reported Thursday by the U.S. Department of Agriculture, said Doug Houghtonne, analyst with Brock Associates. It was the second consecutive week of solid sales for the U.S.

 

"It still looks like the market is on firm ground following the strong export demand," Houghtonne said. "As long as we're selling all that wheat, it'll be hard to break that market much. There's no indication that demand is being cut back or supplies are being rationed."

 

Next week, market participants will be looking ahead to the release of the USDA crop production and supply/demand report Aug. 10, Houghtonne said. Prices may consolidate a bit going into the report, he said.

 

 

Kansas City Board of Trade

 

KCBT September wheat ended down 4 1/4 cents on the week, while KCBT December wheat was down 3 3/4 cents on the week.

 

It was a "very quiet" and low-volume session at the KCBT, a floor trader said. Moving forward, the trade's focus will shift more to the development of crops in the Southern Hemisphere, including Australia and Argentina, he said.

 

Private analytical firm Informa Economics estimated all wheat production at 2.154 billion bushels, up from the USDA's July estimate of 2.138 billion. The firm pegged all winter wheat production at 1.558 billion bushels, down from the USDA's July estimate of 1.562.

 

Hard red winter wheat production was estimated at 963 million bushels, down slightly from the USDA's July estimate of 964 million. Soft red winter wheat production was seen at 364 million bushels, the same as the USDA's July estimate.

 

"We didn't find the numbers surprising," the KCBT trader said.

 

 

Minneapolis Grain Exchange

 

MGE September wheat closed down 2 cents on the week, and MGE December wheat also was down 2 cents on the week.

 

It was an "extremely slow day" on the MGE trading floor, a trader said. MGE wheat futures followed CBOT and KCBT wheat into positive territory, and advances in CBOT soybeans lent further spillover support, he said. The lowered Canadian production estimate also was seen as friendly.

 

Informa estimated other spring wheat production at 519 million bushels, up from the USDA's July estimate of 498 million. The news, while fundamentally bearish, did not weigh on prices as the market had already factored in a strong spring wheat crop, a MGE trader said.

 

"We kind of anticipated that," he said about the increase. "Everybody we've been talking to in early harvest has been seeing some decent yields and some decent quality."

 

Much of the spring wheat crop was able to avoid damage from a recent heat wave because it was in an advanced stage of development, Houghtonne said.