August 8, 2007

 

US Wheat Review on Tuesday: Closes mixed as markets take a breather

 

 

U.S. wheat futures settled mixed Tuesday as market participants took a step back after a climb to new contract highs Monday, traders and analysts said.

 

Chicago Board of Trade September closed 1 1/2 cents lower at US$6.62 1/2 per bushel, while CBOT December wheat ended down 1 cent at US$6.82 1/2. Kansas City Board of Trade September wheat closed 1/2 cent higher to US$6.48, and KCBT December wheat finished 1 1/2 cents higher at US$6.64 1/4. Minneapolis Grain Exchange September wheat rose 4 1/4 cents to US$6.57 1/4, and MGE December wheat settled 2 1/4 cents higher at US$6.65.

 

CBOT September wheat on Monday set a fresh 11-year high for a front-month contract and December wheat reached a fresh all-time high for a second-month contract. After the run-up, the markets felt the need for "a breather" Tuesday, a CBOT floor broker said.

 

The trade also was looking ahead to the release of the U.S. Department of Agriculture crop production and supply/demand reports Friday, analysts said. The report will include new estimates for wheat production and carryout.

 

The average analyst estimate for 2007-08 U.S. wheat carryout is 402 million bushels, down from the USDA's July estimate of 418 million bushels, according to a Dow Jones Newswires survey.

 

An attempt to push prices higher at the opening stalled, despite a rally in EU wheat futures. Paris- and London-based wheat futures traded on Liffe hit new historic highs as this week's harvest results suggest lower European Union wheat yields on the year, traders said.

 

Unable to make solid early moves into positive territory, short-term U.S. traders began looking at news that Egypt bought wheat from Russia as bearish, which caused prices to slump, said Mike Zuzolo, senior analyst with Risk Management Commodities Inc. in Lafayette, Ind. Egypt's state-owned General Authority for Supply Commodities said Tuesday it bought 145,000 metric tonnes of Russian wheat in a tender.

 

Longer-term traders didn't consider the tender results so bearish because "they know the world stocks are tightening up more and more," Zuzolo said. Global 2007-08 ending stocks are pegged at their tightest level since 1981-82.

 

Trading volume wasn't seen as heavy. Rosenthal spread 1,000 September/December, and commodity funds sold an estimated 500 contracts. There was some unwinding of the wheat/corn spread, an analyst said.

 

In other news, much of the wheat belt in eastern portions of Australia continues to have "very dry" conditions as wheat begins heading, Cropcast said in a daily forecast. Only a few light showers are expected for the area in the next 10 days, the weather firm added. New South Wales and South Australia have more time before heading begins but will also need more moisture, Cropcast said.

 

 

Kansas City Board of Trade

 

Gains in French wheat futures boosted KCBT wheat futures in early activity, a KCBT floor trader said. There was some positioning later in the session ahead of the USDA reports, he said.

 

The average analyst estimate for 2007-08 U.S. all-wheat production was 2.129 billion bushels, down slightly from the USDA's July estimate of 2.138 billion, according to a Dow Jones Newswires survey. In 2006, all wheat production was 1.812 billion.

 

The average analyst estimate for all winter wheat production was 1.554 billion, down from the USDA's July estimate of 1.562 billion. In 2006, winter wheat production totaled 1.298 billion.

 

 

Minneapolis Grain Exchange

 

The average analyst estimate for other spring wheat production was 508 million bushels, up from the USDA's July estimate of 498 million, according to the survey of analysts. In 2006, other spring wheat production was 460 million.

 

The average analyst estimate for durum production is 78 million bushels, down from the USDA's July estimate of 79 million. In 2006, durum production totaled 53 million.

 

The USDA on Monday afternoon rated 69% of the U.S. spring wheat crop in good-to-excellent condition as of Sunday, an increase of one percentage point from a week earlier. Market participants ignored the news, a MGE floor trader said.