September 23, 2006

 

US Wheat Review on Friday: Down on profit-taking ahead of weekend

 

 

U.S. wheat futures weakened Friday as traders took profits after this week's rally and on a bit more rain creeping into the Argentine and Australian weather forecasts, an analyst said.

 

Basis December contracts, Chicago Board of Trade wheat lost 2 1/2 cents to US$4.19, Kansas City Board of Trade was down 2 3/4 cents to US$4.81 1/2 and the Minneapolis Grain Exchange fell 4 1/2 cents to US$4.61 a bushel.

 

"There was some long profit-taking going into the weekend," said Dan Zwicker, analyst at AgriVisor Services in Bloomingtonne, Ill.

 

Also, "the weather forecasts have improved a little bit in Australia and Argentina, maybe showing some more rain chances," he added.

 

Light rains between Sept. 13 and Sept. 19 did bring relief to Argentine wheat crops, though drought continues to affect development, the agriculture secretariat said. No significant rains are expected for western areas at least for the next seven days, according to a DTN forecast. About 30% of Argentina's crop is suffering from insufficient moisture.

 

In Australia, where dry conditions are slashing crop production, stress continues in reproductive wheat from New South Wales to southern Queensland. Cooler weather and a few showers in the west and south will ease the stress, but more rain is needed, the forecast said.

 

Time may be running out for eastern areas, however, as that crop moves into its critical heading stage, according to a Cropcast newsletter. The western belt doesn't normally head until October.

 

Meanwhile, an Informa Economics U.S. all-wheat estimate of 62.5 million planted acres also may have pressured prices. The projection was higher than some trade estimates, though Zwicker said it was mostly in-line with ideas of increased acreage this year.

 

Rainy weather moved across the central and southern Plains Thursday into Friday, slowing seedings in some areas but providing needed moisture for the new crop.

 

Traders continue to wait for fresh export news to lift prices. An Iraqi wheat trade delegation travels to Washingtonne D.C. on Monday to meet with Agriculture Secretary Mike Johanns and will then head to Kansas City for a tour of the KCBT and a short press conference.

 

Iraq has been talking with Australia about possible future purchases and traders hope the U.S. can attract a significant amount of that potential business.

 

Funds were net buyers of 2,000 wheat contracts as of 1:30 p.m. EDT.

 

O'Connor and Iowa Grain were the largest buyers of 800 December contracts each, Rosenthal-Collins bought 600 December, Citigroup Global Markets bought 500 Dec, Man Financial bought a net 400 December and Fimat bought 400 December 2007 contracts.

 

Sellers were dominated by the locals, along with UBS selling 300 December and ABN Amro selling 200 December 2007.

 

 

KANSAS CITY BOARD OF TRADE

 

KCBT wheat futures closed weaker, but near session highs, in light-volume trade ahead of the weekend. The Informa estimate and slow trade contributed to the weak tonnee, a broker said.

 

No confirmation on the anticipated Iraqi wheat business also pressured prices.

 

ADM was an early buyer of a net 100 December contracts, Prudential bought 200 December but sold 300 July, J.P. Morgan bought 300 July, while Fimat sold a net 200 December.

 

 

MINNEAPOLIS GRAIN EXCHANGE

 

MGE wheat futures also fell on the weak tonnee in Chicago and Kansas City. Trade was very light.

 

MGE December was held to a quiet inside day on the technical charts, hemmed in by the US$4.65 40-day moving average on the top and the US$4.60 20-day moving average on the bottom.