September 19, 2006

 

US Wheat Review on Monday: Up on firm corn; inspections supportive

 

 

U.S. wheat futures firmed Monday, though sources attributed the gains more to strength in the corn market rather than anything directly tied to wheat.

 

Basis December contracts, Chicago Board of Trade wheat gained 3 cents to US$3.95 1/2, Kansas City Board of Trade rose 3 1/2 cents to US$4.66 and the Minneapolis Grain Exchange added 1 1/4 cents to US$4.43 1/2 a bushel.

 

In fact, wheat will likely continue to be a follower of corn. One analyst said he expects downside pressure to redevelop as corn enters its harvest period and seasonal pressures increase with a projected 11.1 billion-bushel crop just around the corner.

 

Weekly export inspections topped most trade expectations at 18.373 million bushels and were considered a supportive influence, though cumulative 2006-07 inspections at 241.368 million bushels lag last year's pace.

 

Prices continue to be underpinned by concerns that adverse weather in South America, Australia and parts of Europe will drag global wheat stocks lower, though that is tempered somewhat by ideas that beneficial rains in the southern and central U.S. Plains will boost hard red winter wheat seedings this year, sources say.

 

As of last week, U.S. farmers had planted 9% of the HRW crop, versus 11% one year ago and the 12% five-year average. Rains slowed progress somewhat but are badly needed to recharge subsoil and topsoil moisture levels from drought this year. Rains up to 1 1/2 inches fell this weekend over central and eastern areas of the southern Plains, continuing to improve the moisture profile. Additional rains are expected later this week, DTN Meteorlogix said.

 

In other news, Spain's 2006-07 wheat crop is estimated at 5 million metric tonnes, the Spanish Agricultural Ministry said, down from a previous estimate of 5.6 million tonnes but up from last year's drought-stricken crop of 3.8 million.

 

Up to 30% of Argentina's wheat crop is suffering from drought and conditions are worsening since the crop has already passed the stage in which yields are determined, the Buenos Aires Cereals Exchange said.

 

Meanwhile, funds are 2.2% net short CBOT wheat futures, the Commodity Futures Trading Commission's Commitments of Traders report showed. Funds added to both long and short positions in the week to Sept. 12. Fund longs total 63,379 contracts, while fund shorts comprise 73,158 contracts.

 

For the day, funds bought and sold an equal amount of CBOT wheat futures.

 

Man Financial was a featured seller of a net 400 December, while Prudential Financial and Citigroup Global Markets each sold 200 December. Fimat bought 400 December and UBS bought 200 December, while Bunge and ABN Amro each bought 100 December. Rand Financial bought 100 July.

 

 

KANSAS CITY BOARD OF TRADE

 

KCBT wheat futures rose following the firmer Chicago market and supported by spillover from higher CBOT corn futures.

 

Ideas that exports may improve were seen as mildly supportive to the market. A delegation from the Iraqi Grain Board will be at the KCBT on Sept. 26, with a press conference tentatively scheduled for 11:30 a.m. CDT, an exchange spokeswoman said.

 

While traders hope an export deal will be announced, one KCBT broker said he is expecting no significant news to result from the visit.

 

Funds decreased long KCBT wheat futures positions by 1,143 to total 50,362 contracts in the week to Sept. 12, the Commitments of Traders report shows. Funds are net long 25.4% of open interest. Funds lightened shorts by 318 to total 10,476 contracts.

 

 

MINNEAPOLIS GRAIN EXCHANGE

 

MGE wheat futures rose moderately in very light trade, supported largely by gains in Chicago and Kansas City and as the market posted a slight technical rebound from oversold conditions, sources said.

 

Funds decreased longs by 96 to 8,154 contracts and they also reduced shorts by 104 contracts to total 421. Funds are 16.7% net long the market.