September 13, 2006

 

US Wheat Review on Tuesday: Lower on fund sales, spillover, data

 

 

U.S. wheat futures fell to two- and three-week lows Tuesday on a combination of speculative-led fund selling across the board and fresh crop data that held little surprise for traders, sources said.

 

Basis December contracts, Chicago Board of Trade wheat settled 10 1/2 cents lower at US$4.02 1/2, Kansas City Board of Trade fell 8 cents to US$4.70 and the Minneapolis Grain Exchange lost 10 cents to US$4.49 1/4 a bushel.

 

With the decline, the markets' technical setup weakened as prices fell through their major moving averages, according to John Kleist, analyst at Top Third Ag Marketing in Chicago.

 

"It looks like the funds that are net short are trying to keep the hammer on it," he said.

 

While domestic ending stocks and global production and ending stocks all were revised lower, they remained within trade expectations and were considered disappointing overall.

 

In addition, the fact that U.S. 2006-07 ending stocks were revised down by 5 million bushels to 429 million due to an increase in food use and not because of increased exports was a concern, Kleist said.

 

Global production was revised down by 1.9 million metric tonnes to 596.1 million tonnes, mostly on a 2 million-tonne reduction in the Australian crop estimate due to dry weather. And some traders were possibly looking for an even larger cut to the Australian crop after one estimate this week showed the crop could be as low as 13 million tonnes.

 

Global 2006-07 ending stocks were reduced to 126.38 million tonnes, from 128.42 million, on the lower production estimates and increased exports, the USDA said.

 

Fund sales in CBOT wheat and corn each totaled 3,000 contracts by 1:30 p.m. EDT, and spillover pressure from corn and its larger-than-expected 11.1 billion-bushel crop estimate helped hold wheat in negative territory.

 

Fund sales were also seen in soybeans, but to a lesser extent.

 

ABN Amro sold a net 1,700 December contracts, Calyon Financial sold 500 December, Man Financial and Rosenthal-Collins each sold a net 100 December and J.P. Morgan sold 200 July.

 

J.P. Morgan bought a net 300 December.

 

Tenco spread 1,000 March/December at 18 cents.

 

 

KANSAS CITY BOARD OF TRADE

 

KCBT December wheat futures neared a three-week low of US$4.68 1/2 amid the selling that tripped sell stops along the way. The cut to Australian crop production to 19.5 million tonnes, from 21.5 million in August, wasn't out of line with previous estimates and thus lost its potentially supportive effect, a broker said.

 

Overall, the USDA's ending stocks and global production estimates weren't reduced to the extent that many traders had anticipated, he added.

 

Nine percent of the U.S. winter wheat crop was planted to Sept. 10, below the 11% sown in 2005 and the 12% five-year average. While plantings are behind, the fact that rains have fallen on key growing areas is positive for the crop.

 

In earlier trade, ADM sold a net 100 December and bought 200 March, J.P. Morgan bought a net 100 July, Fimat sold a net 600 July, Prudential Financial bought 200 December and Man Financial sold 400 December.

 

Prudential spread 200 December/March contracts at 7 1/2-8 cents.

 

 

MINNEAPOLIS GRAIN EXCHANGE

 

MGE December wheat also fell to near a three-week low of US$4.48 and is technically trading well below its major moving averages. Its relative strength index weakened to 30% and has entered oversold territory.

 

The spring wheat harvest is wrapping up in the northern Plains and traders are now turning their attention to demand and the start of hard red winter wheat plantings on the southern Plains.

 

In export news, Japan seeks 116,000 tonnes of wheat in a tender to be concluded on Thursday, with 55,000 tonnes coming from the U.S., 20,000 from Canada and 41,000 from Australia. The shipment is scheduled for arrival Nov. 1-30.