August 16, 2007

 

US Wheat Review on Wednesday: Down on profit-taking, lack of bullish news

 

 

U.S. wheat futures tumbled Wednesday on profit-taking amid a lack of fresh, bullish news, analysts said.

 

Chicago Board of Trade September wheat fell 14 cents to US$6.78 1/2 per bushel, and Chicago Board of Trade December wheat finished 14 cents lower at US$6.97.

 

Kansas City Board of Trade September wheat ended down 14 1/4 cents at US$6.58, and KCBT December wheat settled 7 1/4 cents lower at US$6.75 3/4. Minneapolis Grain Exchange September wheat tumbled 10 3/4 cents to US$6.63 1/2, and MGE December wheat closed 8 1/2 cents lower at US$6.70 3/4.

 

The markets had room for a setback after climbing to fresh contract and 11-year highs Tuesday following a significant sale to Egypt, traders said. Market participants also get nervous with prices near US$7, they said.

 

"Any time you get a seven figure in front of that wheat, it's getting kind of pricey," said Jason Britt, broker and analyst at Central State Commodities.

 

There was not much surprising, unexpected supportive news Wednesday to spark a new rally or keep prices at their historically high levels, analysts said. Fears about known factors, such as tight global stocks, are "starting to get a bit stale," Britt said.

 

"As they say, a bull market needs to be fed every day," he said.

 

Word that Ukraine's agriculture ministry increased its projected wheat harvest to 15 million tonnes was bearish, analysts said. The ministry earlier had predicted this year's total wheat harvest would be 11.7 million to 12.6 million tonnes.

 

The U.S. Department of Agriculture last week raised its forecast for FSU-12 output from July by 1.25 million tonnes. Projected output remains down from last year due to a drought, but harvest results indicated higher-than-expected winter wheat production in Ukraine, the USDA said.

 

The increase was a departure from recent reports of lowered production estimates in countries such as France and Bulgaria.

 

"In this environment where everybody has been lowering, it puts a little bit of bearish spin on it," Britt said. "I think that would be weighing on the psychology a little bit."

 

The pullback in prices also might be spurring some producers to sell wheat on fears that a market top may be near, an analyst said. When prices are going up, however, "everybody kind of sits on their hands" to wait for the best chance to sell, he said.

 

Commodity funds sold an estimated 1,500 contracts at the CBOT. In pit trades, Fimat bought 500 December and sold 400 July. MF Global, formerly known as Man Financial, bought 400 December, while UBS sold 500 December. In spread activity, some traders were selling wheat and buying corn, an analyst said.

 

Looking ahead, the USDA is slated to release weekly export sales figures Thursday at 8:30 a.m. EDT. Trade estimates call for sales of 300,000 to 500,000.

 

 

Kansas City Board of Trade

 

KCBT wheat futures slumped in a pullback from moves to fresh contract and 11-year highs Tuesday, a KCBT floor trader said. It seems too early to predict a market top, although the trade will be watching Friday to see whether prices are down for the week, he said.

 

Forecasts for a few significant showers in parts of Australia's wheat belt during the next few days were seen adding somewhat of a weaker tonnee to the market, the trader said. Still, more rain will be needed to support favorable development of the wheat crop when temperatures warm in the spring, according to a forecast from DTN Meteorlogix.

 

Showers through Europe's major winter and spring grain areas should cause harvest delays during the next five days, Meteorlogix said. However, the showers do not look as heavy as some that past storm systems produced.

 

 

Minneapolis Grain Exchange

 

Preliminary evaluations of the U.S. spring wheat harvest indicate that although the 2007 crop is forecast to be larger in size, it may also be somewhat lower in quality compared with 2006.

 

"With the problems in the hard red winter wheat belt this summer, and the current production woes in Europe, the spring wheat crop has become very important, as the world looks for high-protein wheat," Benson Quinn Commodities said in a recent market analysis.

 

U.S. Wheat Associates collected and analyzed 59 random samples of newly harvested hard red spring wheat for quality characteristics last week.

 

The average protein content of U.S. HRS wheat is 14.5% so far, down from last year's average of 15.2%, according to U.S. Wheat Associates. The average test weight was 61.5 pounds per bushel, up from than last year's average of 60.4 pounds.