October 29, 2005

 

US Wheat Review on Friday: Down on funds, lack of iraq buy confirm

 

 

U.S. wheat futures settled lower Friday, with Chicago Board of Trade December soft red winter wheat breaking to a near nine-month low late on speculative sales and anxiety about a lack of U.S. Department of Agriculture confirmation of this week's rumored 1-million-metric-tonne U.S. wheat sale to Iraq, brokers said.

 

The continued grind lower, to new contract lows, of nearby corn futures and ideas of increased U.S. Midwest SRW plantings, as high natural gas prices boost corn input costs, also pressured CBOT wheat, they said.

 

SA Inc. sold about 2,500 CBOT December wheat, ABN Amro sold 4,000 December, and Refco Inc. sold about 2,000 December, brokers said, adding that some of the late trade was speculated to be commercial.

 

CBOT December wheat futures settled Friday down 6 3/4 cents at US$3.17 3/4, after falling to US$3.15 1/2, the lowest level since Feb 4. CBOT March wheat ended down 6 3/4 cents at US$3.33.

 

Funds sold about 6,000 to 7,000 CBOT wheat futures Friday, brokers said.

 

The fact that CBOT SRW futures led Friday's late wheat futures break instead of KCBT hard red winter wheat, the type presumably sold to Iraq, was suspicious, said wheat traders, still they worried about a lack of USDA confirmation on the trade.

 

The two companies reportedly selling the U.S. grain to Iraq declined this week to comment.

 

Meanwhile, brokers noted lower-protein CBOT wheat remains the favored short end of the U.S. wheat spread.

 

U.S. SRW wheat export sales have fallen this year, greatly due to a lack of Chinese interest. Demand for higher-protein U.S. hard red winter and spring wheats has cut U.S. supplies.

 

Cash spot U.S. SRW wheat basis bids were mixed, with a 4-cent drop in Cincinnati and a 5-cent gain in Louisville; while spot midday CIF basis bids were steady, they noted.

 

Overnight U.S. wheat export sales were quiet.

 

In global wheat news, India said it will not import wheat due to adequate stocks; and China noted that its September wheat imports were down 90% from last year's imports - both bearish factors for U.S. wheat prices.

 

 

Kansas City Board of Trade

 

KCBT December wheat ended down 2 1/4 cents at US$3.76 after early short-covering drove the contract to a 10-day high; and March closed down 2 1/2 cents at US$3.78 3/4.

 

Bull-spreading was featured early, with the December/March narrowing from a 3 cents carry to a 1/2-cent inverse and widening to close at a 2 3/4 cents carry.

 

ADM Investor Services spread a net 650 December/March, 200 December/July, and 300 March/July; while Fimat spread 150 March/December; Refco Inc. spread 150 March/December and 500 March/July; Shay and Prudential Financial each spread 100 March/December, while the latter also spread 200 July/March.

 

Index funds were beginning to roll out of December positions into March and July, brokers said.

 

In some of the flat price bigger trades, Fimat sold 500 December, Man Financial and Refco Inc. each sold 500 December, and UBS sold 700 December, 100 March and 50 July.

 

ADM Investor Services bought 300 December, sold 200 March and sold 100 July, while Cargill Inc. bought 1,100 December, 200 March and 350 July, and FC Stone bought 100 December and 300 March and sold 100 July and 100 September.

 

Prudential Financial bought 100 March and sold 300 December while Shay Trading sold 500 December and bought 250 March.

 

Cash spot U.S. HRW wheat basis bids were mixed; while spot midday CIF basis bids were steady, they noted.

 

Forecasts pointed to a chance for showers early next week and then for mostly dry weather across the U.S. Plains hard red winter wheat belt.

 

The USDA will update Monday its winter wheat crop progress report; last Monday, the USDA said the U.S. winter wheat crop was 57% good to excellent compared with 76% last year.

 

 

Minneapolis Grain Exchange

 

MGE December wheat settled down 1 3/4 cents at US$3.75 1/4 after early commercial and local buying; March closed down 3 1/4 cents at US$3.80 1/2.

 

Cash spot U.S. HRS wheat basis bids were steady to firm Friday, cash sources said. Difficulties in obtaining railcars continued to hamper U.S. Northern Plains and Canadian wheat movement, they added.