December 5, 2006

 

US Wheat Review on Monday: Ends weaker under pressure from CBOT corn

 

 

U.S. wheat futures closed lower Monday on spillover weakness from neighboring markets and without seeing much support from larger-than-expected U.S. export inspections, analysts said.

 

Chicago Board of Trade March wheat closed 2 cents lower at US$5.18 per bushel, Kansas City Board of Trade March wheat ended down 8 cents at US$5.37 1/2, and Minneapolis Grain Exchange wheat settled 3 1/4 cents lower at US$5.25 1/4.

 

Wheat is the weak link in the grain market and followed CBOT corn lower during the day session, sources said. Considering CBOT corn and soybean futures tumbled to double-digit losses, however, wheat held up fairly well, noted Shawn McCambridge, analyst with Prudential Financial.

 

McCambridge added that wheat is in an overbought condition.

 

"I think, in general, we're going to follow the general directions of the other markets, corn in particular," McCambridge said.

 

Export inspections of U.S. wheat for the week ended Nov. 30 were 20.155 million bushels, the U.S. Department of Agriculture reported Monday. That is above the 13 million to 18 million bushels expected by analysts and higher than the 14.018 million bushels inspected for the week ended Nov. 23.

 

Still, export sales and inspections are down significantly from last year, sources noted. Export business needs to exceed expectations for more than one week in order to ease market concerns, McCambridge said.

 

"People are still concerned about the overall pace" of export business, he said. "Today's good figure followed several weeks of poor figures. It could have just been a little bit of a catch-up week."

 

Outside of the export inspections, there was little other news out to support wheat prices, CBOT floors sources added. Trading was relatively quiet, they said.

 

In CBOT pit trades, Fimat sold 400 March.

 

Funds were net long 29,095 CBOT contracts as of Nov. 28, the Commodity Futures Trading Commission reported Friday. Funds lifted long positions by 1,216 contracts and increased short positions by 683 contracts at CBOT, the CFTC said.

 

Commercials were net short 7,836 contracts at CBOT, according to the CFTC. Commercials cut long positions by 4,662 contracts and short positions by 3,122 contracts, the CFTC said.

 

In other news, Argentina's 2005-06 export wheat sales totaled 8.19 million tonnes as of Dec. 1, according to the latest government data. That puts sales up from 8.17 million tonnes a week earlier, but down from the 11.11 million tonnes of 2004-05 wheat Argentina had sold by this time last year.

 

Brazil's top wheat producer, meanwhile, raised its crop-damage assessment to 48%, or 1.1 million metric tonnes total, up from an Oct. 11 estimate of 46.5%, or 1.2 million tonnes, an official said. A late-winter cold snap destroyed much of the wheat crop in Parana and Rio Grande do Sul, the country's No. 2 wheat-producing state.

 

Overall, Brazil is expected to produce roughly 2.2 million tonnes of wheat, according to government estimates, a national loss of 53.9%.

 

 

Kansas City Board of Trade

 

KCBT March wheat led the downside.

 

There was some heavy speculative selling at the close, although most of the day session was quiet, a KCBT floor source said. Man Financial was a noted seller, he said.

 

Volume was "very light" overall, the source added.

 

"There was not much spreading going on, not much of anything," he said.

 

At KCBT, funds were net long 36,358 contracts, according to the CFTC. They increased long positions by 593 contracts and decreased shorts by 222 contracts, the CFTC said.

 

Commercials were net short 27,928 contracts, the CFTC reported. They cut long positions by 2,002 contracts and shorts by 2,652, according to the CFTC.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures followed CBOT wheat to the downside, a MGE floor source said. Overall, volume was light and trading was subdued, he said.

 

At MGE, funds lifted longs by 692 contracts and decreased shorts by 153 contracts, the CFTC said. Funds were net long 10,770 contracts at MGE, according to the CFTC.

 

Commercials were net short 8,205 contracts, according to the CFTC. They lifted long positions by 212 contracts and increased short positions by 530 contracts, the CFTC said.

 

In other news, the Canadian Wheat Board is going to court in an effort to remove the federal government's "gag order" that prohibits the CWB from spending funds aimed at retaining its single-desk marketing system, a news release from the CWB said Monday.

 

The CWB wants a federal court judge to declare the gag order the federal government imposed earlier this fall is unlawful and exceeds its jurisdiction.

 

The order makes it harder for the CWB to do business and answer farmers' questions about the impact of ending its monopoly, according to the release.