October 24, 2007

 

US Wheat Review on Tuesday: Market falls hard on quiet news front

 

 

U.S. wheat futures fell hard Tuesday, with some contracts ending limit down as the markets were unable to uncover bullish demand news or confirm rumors that Russia would increase its export tariff, analysts said.

 

Chicago Board of Trade December wheat closed limit down, or 30 cents lower, at US$8.41 per bushel. CBOT March wheat also finished 30 cents lower at US$8.61 1/2.

 

Kansas City Board of Trade December wheat tumbled 28 1/4 cents to US$8.59 3/4. Minneapolis Grain Exchange December wheat slid 29 cents to US$8.56.

 

Prices rallied Friday and Monday on bullish demand expectations and on talk that Russia planned to hike its export duty to 30% or 50% from 10%. Traders were disappointed that there weren't any announcements about Russia raising its tariff or about export sales, analysts said.

 

Russia has approved a 10% tariff on wheat exports to take effect next month. There were ideas that an increase would send more export business to the U.S., traders said.

 

"Nobody's been able to confirm prior rumors out of Russia that they're intending to put a 30% or 50% tariff on exports," said Brian Henry, a broker for Archer Financial Services in Chicago.

 

As for fresh demand, news about export business has been scarce lately, analysts said. The U.S. saw a steady stream of sales early in the marketing year amid fears about shrinking global supplies, but business has since quieted.

 

"We haven't seen the big high-profile tender activity on a daily basis like we did at one point," Henry said.

 

U.S. wheat futures need to see new export business in order to sustain any kind of upside momentum, said Shawn McCambridge, analyst for Prudential Financial in Chicago. Long liquidation pressured the markets amid the lack of fresh news, he said.

 

"A lack of news pushes the market into the path of least resistance," McCambridge said. "That's going to be lower at this time."

 

Commodity funds sold an estimated 4,000 contracts at the CBOT. In pit trades, MF Global bought 300 December and sold 300 March.

 

The range for CBOT December wheat during the day session was US$8.41 to US$8.75. Follow-through buying from the overnight offered the contract some support at the opening before profit-taking and long liquidation kicked in, traders said.

 

Trading in U.S. wheat futures markets is going to continue to be choppy, Henry said. Liffe European wheat futures finished narrowly mixed Tuesday, giving up early gains due to spillover pressure from the CBOT, traders said.

 

In Australia, a chance for showers, thundershowers and some rain is in store for New South Wales and southern Queensland during the next three days, DTN Meteorlogix said. Rainfall will favor any late-filling winter wheat but is unfavorable for maturing wheat and could delay the wheat harvest, the private weather firm said.

 

 

Kansas City Board of Trade

 

KCBT wheat futures pulled back from recent rallies with a lack of fresh developments to feed the bulls, a KCBT floor trader said. The markets retreated in a "Turnaround Tuesday," he said.

 

The U.S. Department of Agriculture said Monday afternoon that 82% of the country's winter wheat crop was planted as of Sunday, below the 84% seeded in 2006 and the five-year average of 84%. The USDA said 57% of the crop had emerged, below the 62% in 2006 and the average of 64%.

 

In Kansas, 83% of the wheat has been planted, compared to 92% last year and the average of 89%. Emergence in the state was put at 57%, compared to the average of 68%.

 

Winter wheat areas of the Southern Plains have a mixed soil moisture situation going into the last part of October, DTN Meteorlogix said. Most crop districts have adequate soil moisture, although some dryness is developing in southwestern Kansas and the Oklahoma-northern Texas Panhandle area, the firm said.

 

During the next week to 10 days, the drier sector of the Plains has only a slight chance at showers for additional soil moisture, according to Meteorlogix.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures dropped on profit-taking and in a setback from sharp gains Friday and Monday, a MGE floor trader said. CBOT wheat futures led the downside, he said.

 

Volume was relatively thin, the trader said. It doesn't take much buying to spark a rally or to press prices deep into negative territory, he said.