September 20, 2007

 

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

 

 

U.S. wheat futures sank Wednesday, with contracts at all three exchanges briefly touching limit down on profit-taking and a lack of bullish news, traders said.

 

Chicago Board of Trade December wheat tumbled 24 cents to US$8.45. Kansas City Board of Trade December wheat closed down 20 1/4 cents at US$8.28 1/2, and Minneapolis Grain Exchange December wheat fell 17 1/2 cents to US$7.98 1/4.

 

CBOT December wheat hit limit down, or 30 cents lower, in early activity as traders extended losses from Tuesday. The bulls in the wheat market need to be fed every day, and the overnight offered few fresh, supportive developments to put on their plates, traders said.

 

Commodity funds sold an estimated 5,000 contracts at the CBOT. In pit trades, FC Stonnee bought 1,000 December, while Citigroup sold 600 December and Fimat sold 400 December.

 

There are some bearish ideas that demand is drying up for the near term, an analyst said. End users need to make some unexpected purchases for prices to climb higher, he said.

 

India, for one, reaffirmed it's satisfied with its stocks for the time being and did not plan on issuing any tenders in the near future. India gave the same message earlier this month, although the markets still saw the situation as bearish, traders said.

 

"You have to feed this bull every day," said Louise Gartner, analyst with Spectrum Commodities. "If everybody gets their demand satisfied up front...then you're done (with export sales) for a while."

 

It also seems as though the market is comfortable with the Australian Bureau of Agricultural & Resource Economics' crop estimate of 15.5 million tonnes, traders said. ABARE on Tuesday lowered its forecast 31% from June due to severe dryness.

 

Prices slumped Tuesday despite the cut, which bulls saw as "disappointing," traders said. Tuesday's setback showed panic buying had subsided, an analyst said.

 

Wheat futures climbed to all-time highs last week, and the recent weakness indicates prices may have reached a top, an analyst said.

 

"I think the traders are trying to confirm a top," Gartner said. "There are definitely a group of traders who think the high is in and are willing to step up and sell it."

 

However, it's likely "the market is not going to be ready to roll over until we have the final results from Australia, or it's obvious what those (production) numbers might be," Gartner said.

 

It appears as though widespread rain will drop 0.20-0.33 inch of moisture on western Australia from Sunday into Monday, according to T-Storm Weather. However, the sprinkles will be far less than needed to ease dry conditions, the weather firm said in a forecast.

 

"Australia's major wheat areas have only scattered light showers through the next ten days," DTN Meteorlogix said in its forecast. "Crop losses will increase as the crop enters the heading stage of development during the next few weeks."

 

By contrast, Argentina's central grain belt has received beneficial rains recently. Although the belt was mostly dry Tuesday, soil moisture has increased significantly across the main growing areas of during the past week, Meteorlogix said.

 

On Thursday, the U.S. Department of Agriculture will release weekly export sales data. For the week ended Sept. 13, analysts expect sales to total 600,000 to 1.5 million tonnes.

 

 

Kansas City Board of Trade

 

Fresh talk about India holding off on any new exports triggered early weakness at the KCBT, a floor trader said. The market seized on new comments about India's plans as there wasn't anything else to grab traders' attention, he said.

 

Favorable weather should prompt producers in the U.S. central and southern Plains to speed up wheat seeding through the weekend and next week, T-Storm Weather said in a forecast. The firm predicted mainly dry and unseasonably warm weather in the region for the next several days.

 

Winds will generally blow from south to north and should be occasionally breezy, according to T-Storm. Rain chances in the region increase early next week as cooler air filters southward, the firm said.

 

Planting conditions, in general, "look pretty good," Gartner said. The USDA said U.S. winter wheat planting was 14% complete as of Sunday, below the five-year average of 20%.

 

 

Minneapolis Grain Exchange

 

There was some bearish market chatter that Russia's grain crop could be bigger than previously expected, a MGE floor trader said. Bargain buying helped prices trim losses after hitting limit down, he said.

 

Although prices slipped Tuesday and Wednesday, the losses do not represent a "huge decline" considering wheat's recent run to all-time highs, an MGE floor trader said.