November 8, 2006

 

US Wheat Review on Tuesday: Mostly lower in modest consolidation

 

 

U.S. wheat futures closed mostly lower Tuesday in a slight price consolidation and on weak export demand, sources said.

 

December Chicago Board of Trade wheat ended 1 cent lower at US$4.97 per bushel, December Kansas City Board of Trade wheat closed down 3/4 cents at US$5.25 3/4, and December Minneapolis Grain Exchange wheat settled flat at US$5.09 3/4.

 

"Wheat has been in a corrective mode, a consolidation mode for two to three weeks," said Dan Zwicker, an analyst with AgriVisor. "It's having a hard time getting anything to the upside."

 

Trading was choppy in anticipation of Thursday's scheduled release of U.S. Department of Agriculture crop production and supply/demand reports, a CBOT floor source said.

 

Analysts said they expect the USDA to increase U.S. 2006-07 wheat ending stocks because of weak export demand.

 

The average expectation for U.S. wheat ending stocks is 426 million bushels, according to a Dow Jones Newswires survey of 11 analysts. Their estimates ranged from 393 million to 468 million bushels.

 

In October, USDA pegged ending stocks at 418 million bushels.

 

For the current market year to date, export inspections are 358.145 million bushels, down from 439.321 million last year, the USDA said.

 

"People are doing whatever they can to avoid paying the high prices for U.S. wheat," a CBOT floor trader said.

 

The USDA reported Monday that 94% of the winter wheat crop was planted, compared to 95% in 2005 and the five-year average of 94%. Eighty-two percent of the U.S. winter wheat crop has emerged, compared to 83% in 2005 and the five-year average of 83%, the USDA said.

 

Zwicker noted the crop progress report decreased the amount of U.S. winter wheat in good-to-excellent condition from 60% to 59%. He said, however, the shift did not appear to be affecting market activity much.

 

"I think, generally speaking, they still want to be bullish on the wheat market," he said about traders. "I think the enthusiasm has kind of run its course."

 

A CBOT floor source added that December wheat contracts were starting to roll over this week.

 

In other news, a Ukrainian court has overturned the government's export quota system, the CBOT source said, citing news reports. The development could be bearish for U.S. exports, he said.

 

When asked about the news, analysts said they were more interested to find out when Russia would run out of wheat. Russia has been filling the majority of recent Egyptian tenders.

 

 

Kansas City Board of Trade

 

There was light trading volume on the December/March spread at KCBT, a floor source said. A rally in corn prices carried wheat higher until a sale just before the close.

 

"The corn market kind of buoyed the rest of the grains," he said.

 

There was not much fresh news for traders to move on, the source said. He added traders are waiting to see the USDA report due out Thursday.

 

"Certainly there's not a lot of news to trade on here until we get that out," he said.

 

There are lingering bullish concerns about a drought in one of China's key wheat-growing provinces, he noted.

 

 

Minneapolis Grain Exchange

 

Volume was "really light" at MGE during the day session, a floor source said. There were no major players, he said.

 

"We were just watching corn and we couldn't even go up with it," he said.