October 10, 2007

 

US Wheat Review on Tuesday: Mostly lower as markets extend correction

 

 

U.S. wheat futures finished mostly lower Tuesday as the markets extended their pullback from lofty prices amid ideas that bullish factors have already been dialed in, traders said.

 

Chicago Board of Trade December wheat stumbled 14 1/2 cents to US$8.45 1/2 per bushel, the contract's lowest close since Sept. 19. Kansas City Board of Trade December wheat fell 20 1/4 cents to US$8.44 1/4, the contract's lowest close since Sept. 20. Minneapolis Grain Exchange December wheat slipped 9 cents to US$8.51 3/4, the contract's lowest close since Sept. 25.

 

Although nearby CBOT December wheat ended in negative territory, CBOT July wheat, which represents the new crop, rose. Bear spreading continued to put pressure on the old crop, while lifting the new crop, traders said.

 

Profit-taking and long liquidation have pushed wheat lower for four consecutive day sessions, analysts said. The recent weakness has encouraged bears, and there are ideas that market tops are in place, they said.

 

"The market has really priced in all the negatives that there are," said Greg Wagner, director of marketing and risk management for Horizon Ag Strategy.

 

Australia's forecast continues to look mostly dry, but fears about yield losses due to drought have "run their course," a CBOT floor trader said. Parched West Australia saw up to six-tenths of an inch of rain in some areas Monday, but that is likely "too little, too late to save the wheat crop," DTN Meteorlogix said.

 

Some rain should affect portions of Australia's eastern wheat belt during the next few days, but the heaviest totals are most probable near the Queensland-New South Wales border, T-Storm Weather said in an update to its daily forecast. It would be more beneficial if ran chances shifted southward, but weather models don't indicate that rain will occur where it would be most beneficial, according to the update.

 

"A drought-busting event continues to appear unlikely," T-Storm said.

 

The U.S. Department of Agriculture on Friday is due to release an updated supply and demand report. The trade is most eager to see where the agency pegs Australia's production, although the markets have already penciled in a significant reduction from the USDA's September estimate of 21 million metric tonnes, analysts said.

 

The USDA's new crop estimate for Australia "would have to be an out-of-the-park slash" to impact trading, Wagner said.

 

The USDA said 31.6 million bushels of wheat were inspected for export in the week ended Oct. 4, below trade estimates of 36 million to 41 million. For the current marketing year to date, 490.124 million bushels have been inspected for export, up significantly from the 301.493 million bushels inspected at this time last year.

 

Jordan's Ministry of Trade and Industry said Tuesday it bought 125,000 metric tonnes of optional-origin wheat in a tender for delivery in November. Most of the wheat will probably be Russia, an official said.

 

In the U.K., the 2007-08 wheat export surplus is seen at 1.0 million-1.5 million metric tonnes, down from 2.15 million last year following a smaller harvest, according to preliminary trade estimates released Tuesday. Data compiled so far by the Home Grown Cereals Authority and the U.K.'s Department for Environment, Food and Rural Affairs suggest a 2007-08 wheat crop of 13.5 million-14.0 million tonnes, down from 14.74 million tonnes in 2006-07.

 

However, the final balance sheet remains in question as this season's rise in prices to record highs has altered the amount of wheat being fed to animals, an official said.

 

 

Kansas City Board of Trade

 

Follow-through technical selling from Monday's limit-down closes weighed prices, a KCBT floor trader said. The market attempted to bounce in a recovery from the losses but was unable to hold its gains, he said.

 

The southern Midwest may see some rain this weekend or early next week, and DTN Meteorlogix sees the precipitation possibly veering farther south into the southern Plains. The rains would be "more beneficial to the wheat belt than it would be to the corn and soybean harvest to the north," the firm said.

 

The Delta received more rain Monday than was expected, which will help soil moisture conditions for wheat, Meteorlogix said. Rainfall in Argentina, meanwhile, will mostly benefit wheat, but excess precipitation in some areas caused the wheat crop rating to be downgraded, the firm said.

 

 

Minneapolis Grain Exchange

 

There was little impact from news that Russia said it decided to approve a seasonal export duty on wheat, a MGE floor trader said. The exact figure and the duration of the duty have not yet been formally announced, according to a Russian press report, but officials said earlier it would be 10%.

 

The trade had already talked about the possibility of a Russian export tax, so the development was seen as "old news," the trader said.

 

MGE wheat continues to feel underlying strength from ongoing concerns about tight spring wheat ending stocks, an analyst said. Spring wheat is traded at the MGE.