August 11, 2007
US Wheat Review on Friday: Ends lower in profit-taking, setback
U.S. wheat futures closed lower Friday on profit-taking and in a pullback from recent rallies to historic highs, traders said.
Updated crop data from the U.S. Department of Agriculture didn't offer any adjustments seen as bullish enough to extend gains for the week, analysts added.
Chicago Board of Trade September wheat finished 6 1/2 cents lower at US$6.67 per bushel, up 17 cents on the week. CBOT December wheat ended 6 1/2 cents lower at US$6.84 1/2, up 15 1/2 cents on the week.
Kansas City Board of Trade September wheat settled 5 3/4 cents lower at US$6.54 1/2, up 14 3/4 cents on the week. KCBT December wheat fell 4 1/4 cents to US$6.69, up 14 cents on the week.
Minneapolis Grain Exchange September wheat closed down 6 cents at US$6.64, up 20 1/2 cents on the week. MGE December wheat ended down 8 1/2 cents at US$6.63 1/2, up 8 cents on the week.
The markets were due for a setback after climbing to fresh 11-year highs during the week, traders said. Prices had rallied on fears about dwindling world stocks, global production problems and strong demand.
Wheat futures also finished in negative territory on Thursday, and there may have been some "nervousness coming into the weekend when the market's been unable to maintain its upward momentum," said Louise Gartner, analyst with Spectrum Commodities. At some point, she said, the U.S. will price itself out of global markets.
There also may have been some nervousness among market participants about potential fund liquidation due to weakness in financial markets, Gartner noted.
Commodity funds sold an estimated 1,000 contracts at the CBOT. There was some unwinding of the wheat/corn spreads, a floor trader said.
"I think it's going to be really hard to maintain US$7 wheat without some kind of correction coming into the Southern Hemisphere growing season," Gartner said. "The wheat market is just chopping around. It makes quick moves and then no follow through. I don't think we've seen our highs, but we're close."
The USDA, in its August crop production and supply/demand reports, reinforced that world supplies are tight but didn't shock the market with unexpected adjustments, analysts said.
The agency pegged 2007-08 world ending stocks at 114.8 million metric tonnes, down from 116.6 million in July. It lowered its estimate for 2007-08 U.S. ending stocks to 404 million bushels, down from 417 million in July but slightly above the average pre-report analyst estimate of 402 million.
The USDA cut its output estimates for the European Union and Canada, as expected. The E.U. forecast is for a decline of 1.7 million metric tonnes, which was below some analysts' estimates.
The U.S. export forecast was raised 25 million bushels to 1.075 billion bushels.
Kansas City Board of Trade
It's starting to feel as though a good portion of the fears about tightening world stocks have been factored into the market, a KCBT floor trader said. The drop in world ending stocks was "less than bullish," he said.
The USDA put U.S. 2007-08 all-wheat production at 2.114 billion bushels, down from the USDA's July estimate of 2.138 billion and below the average pre-report analyst estimate of 2.129 billion. A poorer-than-expected winter wheat crop was blamed for the decline, the USDA said. The new USDA forecast for winter wheat production this year is 1.537 billion bushels, below the average pre-report analyst estimate of 1.554 billion. That's a 2% decrease from the July forecast, but still an 18% increase from last year when production was 1.298 billion bushels.
Minneapolis Grain Exchange
The USDA estimated other spring wheat production at 500.1 million bushels, up slightly from its July estimate of 498 million but below the average pre-report analyst estimate of 508 million. In 2006, other spring wheat production was 460 million.
Durum production was pegged at 76.7 million bushels, down from the USDA estimate of 79 million and the average pre-report analyst estimate of 76.7 million. In 2006, durum production totaled 53 million.
