November 17, 2005

 

US Wheat Review on Wednesday: Ends lower on funds, egypt buy, soybeans

 

 

U.S. wheat futures settled lower Wednesday after nearby Chicago Board of Trade wheat futures set new contract lows late on CBOT soybean losses due to concerns the human avian influenza outbreak in China may be worse than anticipated, brokers said.

 

Wheat futures had sagged from Wednesday's opening bell on fund sales and Egypt's purchase of 300,000 tonnes of Australian and French wheat in lieu of U.S. grain, they noted.

 

The U.S. has slipped from being the top wheat supplier to Egypt in 2003 to being the fifth-largest in 2005 as Australia and Argentina have gained market share. Meanwhile, the dollar has rallied 15% against the euro since late 2004, making U.S. grain more expensive for foreign buyers, analysts noted.

 

Egypt last bought wheat Oct. 29, when it purchased 120,000 tonnes of U.S. and Australian wheat.

 

CBOT December wheat ended down 1/4 cent at US$3.06 3/4 per bushel, after setting a new contract low of US$3.04 1/2.

 

CBOT March wheat closed down 3/4 cent at US$3.22 1/2, after making a new contract low of US$3.20.

 

Commodity funds sold 2,000 to 3,000 lots, while spreading was active ahead of the Nov. 30 first notice day for deliveries against December, brokers said. Fimat spread 2,000 December/March while O'Connor and Tenco Inc. each spread March/December.

 

CBOT soybean futures ended down 13 cents to 15 1/2 cents on Wednesday as funds sold amid Asian soy usage fears.

 

Cash spot U.S. SRW wheat basis bids were weaken an average of 2 3/4 cents nationwide Wednesday, while spot midday Gulf SRW wheat basis bids were steady, grain merchandisers said.

 

Cold U.S. Midwest temperatures during the next several days were not expected to harm the soft red winter wheat crop, which is entering its winter dormancy stage, meteorologists said.

 

In other U.S. wheat news, the U.S. Department of Agriculture on Tuesday lifted its suspension on AWB (USA) Ltd., a U.S. subsidiary of Australia's state trading enterprise AWB Ltd., from participating in U.S.-run export credit programs, USDA spokesman Ed Lloyd said.

 

The USDA lifted the suspension after Australia promised to investigate allegations that AWB Ltd. made illegal payments to the former Saddam regime while participating in the United Nations Oil-for-Food Program. Meanwhile, the U.S. Wheat Associates said it had established a one-year- long credit line worth US$150 million to facilitate wheat imports for Egypt, Lebanon and Jordan, according to a Cairo newspaper Wednesday.

 

In global wheat news, Ukraine's agriculture ministry raised its 2006 winter milling wheat harvest forecast to 6 million metric tonnes from the previous figure of 4.0 million to 4.5 million tonnes.

 

And Argentina's Agriculture Secretariat forecast Wednesday the country's 2005-06 wheat crop would total 12 million tonnes, down 25% from last year's crop and just below the latest USDA forecast for 12.1 million tonnes.

 

Finally, French wheat traders said they too were disappointed with Wednesday's 300,000-tonne wheat purchase by Egypt as they believed French prices were more competitive than Australian prices.

 

Moreover, they expected Black Sea wheat to regain competitiveness in January, pressuring French wheat export sales.

 

For Thursday's European free-market export tender, traders expect an export refund of around EUR4.50-EUR5/tonne.

 

 

Kansas City Board of Trade

 

KCBT December ended down 3 cents at US$3.57 3/4 and KCBT March closed down 2 cents at US$3.63 3/4 per bushel.

 

ADM Investor Services sold 400 March and bought 100 December, Frontier Trading sold 400 July, Cargill Investor Services bought 250 December and 100 March, FC Stone bought 150 December and 150 March, Fimat bought 300 December, Man Financial sold 400 March and sold 200 December, Prudential Financial sold 300 December and 150 March and Refco Inc. sold 350 March and bought 100 December, brokers said.

 

Spreading was also noted ahead of the Nov. 30 first notice day for deliveries against December. Cargill Investor Services bought 750 December/March, Shay Grain sold 650 December/March and sold 400 December/March.

 

Cash spot U.S. HRW cash basis bids were firm, while spot midday U.S. Gulf HRW basis bids were steady, cash sources said.

 

 

Minneapolis Grain Exchange

 

MGE December ended down 1 3/4 cents at US$3.72 3/4 and March closed down 1 1/4 cents at US$3.77 1/4 per bushel.

 

There was spreading early of March/December, and buying of March by UBS Warburg, sources said.

 

Locals then forced the December/March spread took to a 1-cent carry before Refco Inc. rolled about 300 March/December, taking the spread back to eventually close at 4 1/2 cents, premium March, a source said.

 

"There was some short-covering at the close by ADM in the Dec and there was also some MOC buying in the March," one broker said.

 

"Scale-down buying has been noticed and the market appears to be underpinned by ideas of export demand, including weekly Japanese business, other Southeast Asian business and some Latin American business," the trader added.

 

Cash spot U.S. spring wheat basis bids were steady to firm Wednesday, cash sources said.