November 9, 2006

 

US Wheat Review on Wednesday: Up on corn but profit-taking trims gains

 

 

U.S. wheat futures closed solidly firmer Wednesday as fund buying on spillover strength from corn carried prices higher, analysts said.

 

December Chicago Board of Trade wheat climbed as much as 22 cents higher near midday, but profit-taking trimmed gains in late dealings, sources said.

 

December CBOT wheat settled up 7 cents higher at US$5.04 per bushel, December Kansas City Board of Trade wheat closed 5 3/4 cents higher at US$5.31 1/2, and December Minneapolis Grain Exchange wheat closed up 4 1/2 cents at US$5.14 1/4.

 

"I think that the funds are stepping up here," said Louise Gartner, an analyst with Spectrum Commodities.

 

CBOT corn futures extended new life-of-contract highs on speculative fund buying ahead of Thursday's scheduled release of crop production and supply/demand reports from the U.S. Department of Agriculture, sources said. Analysts are expecting the USDA will reduce the size of the corn crop, which would put pressure on tightened supplies.

 

Corn and wheat are directly related, Gartner noted, because wheat can be substituted for feed corn.

 

In CBOT pit trades, ABN Amro bought 1,000 December wheat, and RJ O'Brien bought 500 December wheat. Fimat and Shatkin Arbor each bought 400 December wheat. Fortis sold 1,000 December wheat. Funds bought 1,000.

 

Looking at 2006 U.S. wheat production, a new report says the grain quality was better, even though a drought on the Great Plains reduced the quantity. U.S. Wheat Associates said in the report that almost all wheat varieties came out of the field cleaner, drier, heavier, and with higher protein content.

 

Even though hard red winter wheat production was down, for example, most plants were heavy and dense, pushing the overall crop into the government's top quality classification - USDA #1 HRW.

 

The USDA last estimated the total 2006 US wheat crop at 1.8 billion bushels, representing a decline of 14% from 2005. Yields, which averaged 38.3 bushels an acre, were down 3.7 bushels from last year.

 

In other news, Morocco said Wednesday it bought 9,500 metric tonnes of U.S. durum wheat in a tender for shipment before the end of December. Morocco was looking to buy a total of 230,000 tonnes of U.S. wheat, but didn't receive the necessary offers, a Casablanca-based trader told Dow Jones Newswires.

 

The sale was considered small and didn't have much affect of prices much as durum is not really traded at any of the exchanges, an analyst said.

 

A CBOT floor trader, however, said the news was seen by some as a sign of supportive buying interest in the face of slow U.S. export sales. Export inspections for the current market year to date are down to 358.145 million bushels from 439.321 million last year, according to the USDA.

 

"It does show that they're out there and they need to buy," the trader said about Morocco.

 

India, meanwhile, said it has no plans to extend the Dec. 31 deadline for duty-free imports of wheat by private companies. Private importers complain that any further wheat import contracts are unlikely to be made within the deadline because of tight global wheat supplies, rising international prices and congestion at local ports.

 

India cut the import duty on wheat to 5% from 50% on June 29 and to zero on Sept. 9 in order to boost local supplies and check inflation.

 

 

Kansas City Board of Trade

 

KCBT saw moderate to light trading volume during the day session, a floor source said. There was some spreading of the December/March contract, he said.

 

The December contract is starting to roll over, he noted.

 

Strength from corn carried wheat prices higher, the source said. There was profit-taking later in the day session, he said.

 

 

Minneapolis Grain Exchange

 

MGE saw moderate trading volume with support for prices from the corn rally, a floor source said.

 

"It was corn right off the bat and corn most of the day basically," he said.

 

Traders have bullish expectations that the USDA will reduce the corn crop in Thursday's report, the source said.

 

"I think people are aligning themselves so they're not going to be coming in short," he said.