December 3, 2005

 

US Wheat Review on Friday: Ends lower on pre-weekend consoldiation

 

 

U.S. wheat futures closed lower Friday led by pre-weekend sales in KCBT wheat after an early near three-week high, with KCBT December leading on redeliveries and lingering pressure from Thursday's disappointing weekly U.S. wheat exports sales, brokers said.

 

Light speculative sales pressured Chicago Board of Trade soft red winter wheat, while Minneapolis Grain Exchange spring wheat futures sagged late on a weakening HRS basis amid farmer sales and losses in KCBT, they added.

 

CBOT December wheat ended Friday down 2 cents at US$3.03 1/2, and March settled down 2 1/4 cents at US$3.19 3/4.

 

Commodity funds were net sellers, led by ABN Amro's early sale of 600 march. JP Morgan bought 400 March while Fimat bought 300 March, brokers said.

 

Some CBOT traders noted recent news stories about the early 2006 reweighting of long-only commodity index funds, including the DJ-AIG Commodity Index on Jan. 6, had prompted speculation that monies would be pulled from CBOT wheat and corn futures and increased in CBOT soybeans.

 

Some traders were also beginning to anticipate a index-fund led bounce in the markets in early January similar to that seen last year.

 

Cash spot U.S. SRW wheat basis bids were steady-firm Friday; spot midday Gulf SRW wheat basis bids steady, grain sources said.

 

There were 1,941 deliveries posted Friday against CBOT December wheat with Henning Carey/LIT Division of Man Financial stopping 714 lots. The ample deliveries reflect the slow export demand for U.S. SRW, and continue to weigh on CBOT SRW wheat.

 

U.S. wheat export business was quiet Friday.

 

Global wheat news was also relatively quiet, while wheat traders continued to watch harvest reports from key Southern Hemisphere exporters Argentina and Australia.

 

Argentine farmers had collected 15% of the country's 2005-06 wheat harvest by Thursday, down from last year's 26%, the Agriculture Secretariat reported Friday.

 

The average yield last week was 1.67 tonnes per hectare, up from 1.32 tonnes the previous week, the Exchange said.

 

The U.S. Department of Agriculture, which has forecast the average yield this season at 2.39 tonnes/hectare, estimates final output at 12.1 million metric tonnes.

 

 

Kansas City Board of Trade

 

KCBT December wheat settled down 4 3/4 cents at US$3.66, and March wheat down 3 3/4 cents at US$3.70 1/4.

 

ADM Invesotr Services sold 1,400 March and bought 300 July, Cargill Investor Services bought 200 March and 100 July, Man Financial bought 400 March and sold 100 May and Prudential was a featured buyer of March, brokers said.

 

In spread trade, Prudential and Fimat each spread 200 March/December while Prudential also spread 200 March/July.

 

The KCBT/CBOT March spread settled Friday at 50 1/2 cents, premium KCBT; the spread closed Thursday at 52 cents.

 

The KCBT/CBOT spread, along with buying high-protein MGE futures and selling CBOT wheat, became popular this summer as demand for higher-protein U.S. food wheat began outpacing that for lower-protein U.S. wheat.

 

A sharp decline this year of purchases of U.S. SRW wheat by China particularly hit that class's demand ledger, according to the U.S. Wheat Associates, the U.S. wheat industry's export market development organization.

 

The U.S. Department of Agriculture's monthly balance sheets continue to reflect the differences between the wheat classes.

 

The USDA on Nov. 12 forecast U.S. HRW wheat supplies at the end of the 2005-06 marketing year on May 31 would drop to 175 million bushels, a stocks to use ratio of 18.5%; while U.S. SRW wheat carryover stocks would total 90 million bushels, a stocks to use ratio of 27%.

 

The USDA will update its outlook on Dec. 9.

 

Moreover, speculative commodity funds have built up a hefty position in U.S. wheat futures this year - net long KCBT and MGE wheat and net short CBOT. Those profitable stances have bolstered the KCBT/CBOT spreads¡¯ strength, analysts said.

 

There were 10 deliveries and 348 redeliveries posted Friday against KCBT December wheat. The Term Commodities house account stopped 215 lots.

 

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

 

 

Minneapolis Grain Exchange

 

MGE December wheat ended down 5 cents at US$3.71 1/2, and MGE March closed down 5 cents at US$3.75 per bushel, below the 50-day moving average of US$3.78 1/2.

 

No deliveries were posted Friday against MGE December wheat.

 

Cash U.S. spring wheat bids weakened, reflecting the heavy farmer sales, brokers said. Minneapolis wheat rail receipts Friday totaled 294 cars versus 76 cars last year.