November 8, 2005

 

US Wheat Review on Monday: Down on speculative sales; spreads active

 

 

U.S. wheat futures settled lower Monday, pressured by follow-through speculative commodity fund sales in Kansas City and Minneapolis wheat futures amid a lack of bullish U.S. wheat export news, brokers said.

 

Weekend U.S. wheat export sales were quiet while the U.S. Department of Agriculture reported Monday weekly U.S. wheat export inspections totaled 17.135 million bushels, below traders' estimates.

 

Technical sell stops were triggered as Kansas City Board of Trade December hard red winter wheat futures fell below their key 100-day moving average of US$3.60 per bushel, while scale-down commercial buying limited losses in Minneapolis Grain Exchange spring wheat futures, brokers said.

 

"They have pretty much exhausted their selling interest right now in Chicago, but there's some additional selling interest in Kansas City," said Shawn McCambridge, a grain analyst at Prudential Financial.

 

Chicago Board of Trade soft red winter wheat futures also ended lower Monday, with bellwether CBOT December sinking within the last five minutes to a contract low of US$3.08 3/4, on speculative sales and spreading despite technically oversold market conditions.

 

CBOT December wheat futures settled Monday down 1 1/4 cents at US$3.10, while CBOT March wheat ended down 1 1/2 cents at US$3.25 3/4.

 

Commodity funds were light net sellers, with Fimat USA selling 500 December, Citigroup selling 300 December, R.J. O'Brien selling 200 December and Refco Inc. buying 500 December, brokers said.

 

Spreading by speculative commodity funds that roll long position back one month at a time continued ahead of the Nov. 30 first notice day for deliveries against CBOT December, brokers said. Calyon Financial spread 2,500 March/December while Fimat spread 2,000 March/December, they noted.

 

Cash spot U.S. SRW wheat basis bids were mixed Monday, with a 20-cent gain in Evansville, Ind., and a 6-cent loss in Cincinnati, cash brokers said. Spot midday CIF SRW wheat basis bids were up 1 cent, they noted.

 

Little price volatility was expected before Thursday's scheduled USDA monthly crop supply and demand report, brokers noted.

 

Analysts surveyed by Dow Jones forecast on average that the government would report Thursday 2005-06 U.S. wheat ending stocks at 533 million bushels, up slightly from last month's 530 million. "What we'll watch in the wheat market is whether the USDA will make some additional changes in the class balance sheets," said Dale Gustafson, a grain analyst at Citigroup.

 

"I think there is potential in here that they could take the exports up a little further on the hard red winter category and take the soft red down a little on the exports," he added. "Of course, that would tighten up the hard red carryout and weaken the soft red carryout."

 

Good global demand for higher-protein U.S. HRW and HRS wheat has underpinned those classes' prices this year, while ample global feed wheat stocks continued to weigh on U.S. SRW wheat prices, analysts noted.

 

In global news, wheat prices in top global wheat producer China fell slightly after two wheat auctions late last week, reflecting some supply concerns, with demand at normal levels, traders said.

 

Meanwhile, a commodity analyst at Commonwealth Bank of Australia said Monday that Australia's bumper wheat crop could be at risk from too much rain, potentially adding to the ample global feed wheat supply.

 

If a large portion of the new crop is damaged by rain and downgraded to feed status, this would put added pressure on an already wide global price spread between hard and soft wheat, the analyst noted.

 

 

Kansas City Board of Trade

 

KCBT December wheat ended Monday down 7 cents at US$3.59 3/4, just below the key 100-day moving average of US$3.60; and March closed down 4 3/4 cents at US$3.67.

 

Man Financial was the featured seller, of 600 December while buying 300 March, while ADM Investor Services sold 300 March and 400 July, and Fimat sold 300 December and 100 March, brokers said.

 

Spreading by index funds was also noted ahead of first notice day on Nov. 30, with Shay Trading and Frontier each spreading 500 March/December, a source said.

 

Cash spot U.S. HRW wheat basis bids were steady to weak Monday, with an 11-cent drop in Enid, Okla.; while spot midday Gulf HRW basis bids were steady, they noted.

 

KCBT wheat brokers said the market's focus this week would be centered on concerns about expansion of dryness in the southern HRW wheat belt, lingering rains in Australia during harvest, and poor crop weather in Argentina where the Buenos Aries exchange recently cut its 2005-06 crop estimate to 12 million metric tonnes.

 

The USDA will update late Monday its crop condition report. Last Monday, the USDA said the U.S. winter wheat crop was 61% in good-to-excellent shape, a 4-percentage-point improvement from the previous week.

 

 

Minneapolis Grain Exchange

 

MGE December wheat settled Monday down 4 cents at US$3.68 1/2; and March closed down 4 cents at US$3.74 on speculative sales following weakness in KCBT wheat futures, brokers said.

 

Losses were limited by scale-down commercial buying, they noted.

 

Country Hedging bought about 150 December and 100 March, ADM Investor Services bought 100 December and 100 March, and UBS was a light buyer, brokers noted.

 

Cash spot U.S. HRS wheat basis bids were steady to firm, with a 5-cent gain in Minneapolis Monday, cash sources said.