October 27, 2006

 

US Wheat Review on Friday: Prices end higher on exports, Australia

  

 

U.S. wheat futures settled modestly higher Friday with support seen from new export sales and Australian production concerns, analysts said.

 

Trading during the day session was choppy, however, and prices were pressured by profit-taking and because traders had anticipated the bullish news, sources said.

 

December Chicago Board of Trade wheat ended up 1 cent at US$5.08 1/2 per bushel, December Kansas City Board of Trade closed 1/2 cents lower at US$5.30 3/4, and December Minneapolis Grain Exchange wheat settled 1 1/4 cents higher at US$5.08.

 

The U.S. Department of Agriculture said Friday Iraq had bought 400,000 metric tonnes of U.S. hard red winter wheat for delivery in the 2006-07 marketing year, which began Sept. 1. Traders said it looked as though the sale represented new business, rather than a confirmation of previous business.

 

Egypt, meanwhile, bought 60,000 metric tonnes of U.S. soft white wheat and 120,000 metric tonnes of Russian wheat.

 

"It was definitely the export business that lifted prices," one CBOT floor trader said.

 

Dale Durchholz, a senior analyst with AgriVisor, added that the U.S. is still lagging on total export sales for the year.

 

"Other export business has been pretty soft," he said. "People are saying, 'Yeah, we really need to see the rest of this business.'"

 

There also was news from the Australian Bureau of Agricultural & Resource Economics, or ABARE, which cut its production forecast to 9.5 million metric tonnes because of a severe drought. The bureau last month estimated production for the year would be 16.4 million tonnes, down from about 25 million tonnes last crop year.

 

The forecast was "friendly but it wasn't wildly bullish either," Durchholz said.

 

Industry groups had previously estimated Australia's crop would be around 10 million tonnes because of a drought. Earlier this week, AWB Inc., Australia's wheat export monopoly, pegged production at between 9 million and 11 million tonnes.

 

Still, a CBOT floor source said it made a difference for speculative buyers to see fresh low estimates on paper.

  

 

Kansas City Board of Trade

  

Trading at KCBT topped out shortly after the opening on the export news and "slowly and steadily worked its way lower," a KCBT floor source said.

 

"Most of the trade was really choppy and thin," she said.

 

The source said there were numerous spread trades as prices moved up and down before closing slightly higher.

 

"I would more or less just basically say that people are covering their positions before the weekend," she said.

 

 

Minneapolis Grain Exchange

  

MGE trading followed CBOT prices up and down during the day, a MGE floor source said.

 

"We were passengers again," he said.

 

He said the low Australian production estimate was "old news" but noted traders took the sale to Iraq as new business.

 

The source added that trading was choppy throughout the day session.