November 17, 2007

 

US Wheat Review on Friday: Slumps on profit-taking, pullback

 

 

U.S. wheat futures were weaker Friday amid profit-taking and ideas that a weather-related rally Thursday was overdone, traders said.

 

Chicago Board of Trade December wheat closed down 16 cents at US$7.49 1/2 a bushel, down 12 1/2 cents on the week. Kansas City Board of Trade December wheat fell 12 1/2 cents to US$7.74 1/2, down 10 1/4 cents on the week. Minneapolis Grain Exchange December wheat dropped 8 cents to US$8.26, up 8 cents on the week.

 

Traders took some money off the table before the weekend and before next week, when volume is expected to be thinner than usual due to the Thanksgiving holiday, a CBOT floor broker said. Commodity funds sold an estimated 3,000 contracts at the CBOT.

 

The markets also pulled back on ideas that Thursday's gains were overdone amid concerns about potential damage from frost in Argentina, traders said. Thursday's frost and freeze across Buenos Aires may have damaged any flowering or heading wheat, but it isn't expected to be a "major concern," DTN Meteorlogix said.

 

"Talk circulated that cold weather in Argentina did little if any crop damage," said Brian Hoops, president of Midwest Market Solutions.

 

Prices tumbled even though a weekly export sales report from the U.S. Department of Agriculture was considered bullish, an analyst said. The USDA said sales for the week ended Nov. 8 were 416,000 metric tonnes, at the high end of trade estimates.

 

The sales were "solid," said Joe Victor, vice president of marketing for Allendale. It also seems as though cancelations and buybacks of previous sales are tapering off, he said.

 

India, Morocco and Jordan all tendered for wheat this week, which is a good sign world demand is picking up, Victor said. Still, the U.S. will face competition on the export market from Argentina, which has started harvesting its crop, he said.

 

Argentina's 2007-08 wheat export commitments soared to more than 4.1 million metric tonnes as of Nov. 15, according to the Agriculture Secretariat's latest data. On Tuesday, the secretariat opened the wheat export registry, which had been closed since March.

 

In three days, exporters committed to shipping about 40% of the new crop available.

 

 

Kansas City Board of Trade

 

KCBT wheat futures slumped in a correction from Thursday's run-up on Argentina, a floor trader said. Export sales were "decent" but unable to push prices higher because there was a lack of buyers, he said.

 

New-crop wheat felt support from ongoing concerns about dryness in the U.S. Plains, an analyst said. KCBT July wheat closed down 6 1/4 cents at US$6.93 1/2.

 

During the next seven to 10 days, precipitation is expected to be generally below normal in the Plains through western Midwest, Meteorlogix said. The driest areas will be the southwest Plains winter wheat areas of western Kansas, the Texas-Oklahoma Panhandle, eastern Colorado, and western Nebraska.

 

"Dryness continues to stress wheat growth through the western belt," Meteorlogix said. "The long-range outlook has only a slight chance for significant rainfall in this area. Cooler weather during the six- to ten-day period should slow development of wheat."

 

The USDA on Monday is slated to release its weekly crop progress report, including updates on condition ratings and emergence. Emergence in southern Plains states is lagging due to the dryness, analysts have said.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures followed the CBOT lower but did not fall as much as the other markets due to underlying concerns about tight spring wheat stocks, a MGE floor trader said. For the second week in a row, MGE December wheat gained on the week, while CBOT and KCBT December wheat closed lower on the week.

 

Despite the tight supplies, traders are still looking for fresh demand news, the MGE trader said.