November 6, 2007

 

US Wheat Review on Monday: Rises on position-squaring, screen buying

 

 

U.S. wheat futures finished firmer Monday on position-squaring and a technical bounce after recent losses, analysts said.

 

Chicago Board of Trade December wheat rose 6 1/2 cents to US$7.85 per bushel. Kansas City Board of Trade December wheat settled 6 cents higher at US$8.12 1/4, and Minneapolis Grain Exchange December wheat climbed 15 cents to US$8.28 1/2.

 

Floor trading was quiet during the day session, and most of the buying was electronic, traders said. There was little fresh fundamental news out, but traders squared up positions after steep losses last week, they said.

 

"We've beat up on the wheat complex for quite some time," said Dave Marshall, an independent marketing advisor and commodities broker in Nashville, Ill.

 

Commodity funds bought an estimated 3,000 contracts at the CBOT.

 

There was underlying support from speculation that India, Iraq and Pakistan may buy wheat later this week, analysts and traders said. India, for one, is not expected to buy U.S. wheat in a tender because of disagreements over phytosanitary requirements, but a large purchase from anywhere would tighten world supplies when stocks are already tight, they said.

 

The Buenos Aires Cereals Exchange said Argentina will grow 15.2 million metric tonnes of wheat during the 2007-08 season, up 1 million tonnes from last season. Area planted with wheat this season was down 1.8% from last season, but good conditions this season and drought last year will result in higher yields from the new crop, the exchange said.

 

The larger Argentine crop would be bearish, but grain traders may have a vested interest in talking about a production increase because they want the government to re-open the wheat export registry, an analyst said. Also, sizable tenders from Pakistan and India would "easily offset" a bigger crop, Marshall said.

 

"The bullish fundamentals and the tightness of world wheat supplies didn't disappear," Marshall said.

 

Egypt last week bought 155,000 tonnes of Russian wheat, 60,000 tonnes from Canada and 60,000 tonnes from the U.S. Declines in the value of the U.S. dollar remain a bullish factor for U.S commodities, and North America would probably have had an even bigger chunk of the Egyptian wheat business if freight rates weren't so high, a CBOT floor trader said.

 

Frost and light freezing conditions through Argentina's southern wheat belt during the weekend may have been a problem for any flowering wheat, DTN Meteorlogix said. However, the cold snap is not expected to be "a major concern" for wheat overall, the private weather firm said.

 

Widespread rain and thunderstorms occurred in crop areas through central and eastern Australia during the weekend. Rain in the east is unfavorable for maturing wheat and may delay the harvest, Meteorlogix said. Rain in central and southeast Australia may favor any late-filling wheat but it is probably too late to significantly change crop production forecasts, the firm said.

 

 

Kansas City Board of Trade

 

KCBT wheat futures rose on short-covering in subdued trading, a floor trader said. The market is waiting for fresh demand news, he said.

 

The U.S. Department of Agriculture on Friday is slated to issue its November supply and demand report, which will include updated forecasts for wheat ending stocks and export sales. There could be some liquidation going into the report, the KCBT trader said.

 

Dryness in western parts of the Plains is unfavorable for developing hard red winter wheat, traded at the KCBT, the trader and meteorologists said. Forecasts through Nov. 15 call for normal to above-normal precipitation in the Midwest and eastern Plains wheat areas, but continued dryness in the western Plains, according to Meteorlogix.

 

"This outlook gives a good chance for renewed soil moisture in soft red winter wheat areas," Meteorlogix said. "However, the drying trend in soil moisture over the western Plains wheat country will continue. This dry pattern is potentially harmful to wheat crop prospects for the 2008 harvest."

 

 

Minneapolis Grain Exchange

 

Floor activity was thin at the MGE, with screen-based buying boosting prices, a MGE floor trader said. Bull spreading was a feature of the session, with some commercial traders buying nearby December wheat and selling the new-crop July contract, he said. The December/March spread also narrowed considerably, he added.

 

Weekly U.S. wheat export inspections of 29.4 million bushels were within trade estimates. Analysts had expected inspections of 27 million to 39 million bushels. For the marketing year to date, 616.802 million bushels have been inspected for export, up from 361.106 million at the same time last year, according to the USDA.