September 26, 2006
US Wheat Review on Monday: Down on fund sales, no export business
Wheat futures fell Monday on fund selling, no fresh export business from Iraq and beneficial rains this weekend over the Plains wheat belt, sources said.
Basis December contracts, Chicago Board of Trade fell 5 1/4 cents to US$4.13 3/4, Kansas City Board of Trade fell 10 1/2 cents to US$4.71 and the Minneapolis Grain Exchange fell 7 cents to US$4.54 a bushel.
"We rallied last week on rumors that Iraq would buy U.S. wheat," and prices have fallen since there has been no confirmation of any export business, said Brian Hoops, president and senior market analyst at Midwest Market Solutions in Yanktonne, S.D.
Iraqi Trade Minister Abdul Falah al-Sudani met with U.S. Department of Agriculture Secretary Mike Johanns Monday in Washingtonne, D.C., but said he did not intend to announce an intention to purchase wheat, which disappointed market bulls. The trade minister said he expects "good news" on that front soon, however.
An Iraqi wheat delegation heads to Kansas City Tuesday to tour the KCBT and meet with trade leaders. They will hold a short press conference at 11:30 a.m. CDT. Al-Sudani will not travel to Kansas City with the delegation, however.
Meanwhile, weekly export sales estimates were in line with expectations at 16.701 million bushels, but they were down from last week's 20.865 million. Cumulative sales for 2006-07 are 260.561 million bushels, versus 310.701 million at this time last year.
The central and southern Plains saw rains of 0.40-1.25 inches over the weekend, which continues to recharge soil moisture. Mostly dry weather is seen for Tuesday, with a few light showers possible Wednesday and scattered showers Thursday, Meteorlogix said.
In other news, the U.K.'s 2006 wheat crop is estimated at 14.1 million metric tonnes, up 1.4% from the 13.9 million tonnes harvested last year, the National Farmer's Union said. The increase was due to excellent planting conditions last fall and mostly favorable harvest conditions despite adverse August weather.
Brazil's second-largest wheat producing state, Rio Grande do Sul, lost 22% of its 2006 winter wheat crop to severe frost the first week of September. The loss will likely put Brazil's total wheat crop under 3 million tonnes, compared to an initial estimate of 5 million tonnes at the beginning of the planting season.
Parana state, Brazil's No. 1 producer, also saw crop-damaging cold in the southern half of the state, but no official damage estimate has been made.
Fund sales pressured U.S. wheat futures, with weakness encouraged by speculative-led selling seen across many commodity markets, though a late rally in energies allowed prices to come off their lows.
Funds sold a net 2,500 CBOT wheat contracts as of 1:30 p.m. EDT.
J.P. Morgan sold 700 December, Rand Financial sold 500 December, Rosenthal-Collins sold a net 100 December and Goldenberg-Hehmeyer sold 400 December.
Fimat bought a net 100 December and Citigroup Global Markets bought 200 December.
KANSAS CITY BOARD OF TRADE
KCBT wheat futures led the losses, pressured by spillover weakness from lower corn futures on improving weather conditions in the corn belt.
In addition, slightly better rain chances in Argentina's growing areas may improve that country's crop and added price pressure.
December fell to a five-session low of US$4.69 1/2 and filled a portion of the downside chart gap that runs from US$4.69 1/2 to US$4.68.
In early trade, J.P. Morgan bought 200 December and sold 200 March, while Man Financial, Frontier Futures and Shay Grain each sold 200 December.
MINNEAPOLIS GRAIN EXCHANGE
KCBT wheat futures fell to a four-session low of US$4.51 on the selling pressure and settled near the day's midrange.
Price pressure resulted from lower CBOT and KCBT futures and no word on new export business.
Technically, December found support near the 10-day moving average at US$4.51 and met resistance near the US$4.58 20-day moving average.
