December 6, 2006

 

US Wheat Review on Tuesday: Stumbles modestly amid lack of news

 

 

U.S. wheat futures slipped modestly Tuesday on light speculative selling and with a lack of news to attract buyers, analysts said.

 

Chicago Board of Trade March wheat closed 3/4 cent lower at US$5.17 1/4 per bushel, Kansas City Board of Trade March wheat ended 3 1/4 cents down at US$5.34 1/4, and Minneapolis Grain Exchange wheat settled 2 1/2 cents lower at US$5.22 3/4.

 

Prices opened lower in the day session on follow-through selling from Monday's declines and weaker overnight trade, sources said. Prices stayed weaker without fresh news to inspire aggressive market moves, they added.

 

"Wheat is in more of a holding pattern," said Dan Zwicker, senior analyst with AgriVisor. "I don't think there's anything new for the wheat market to trade."

 

Wheat is a follower in the grain market, while corn is the leader, a CBOT floor trader noted. CBOT corn and soybeans closed higher Tuesday, giving wheat some support, they said.

 

In CBOT pit trades, Man Financial bought 300 March and sold 400 March.

 

"When corn and soybeans began to get some traction," Zwicker said, "I think that's what pulled wheat along with it."

 

Traders, however, continue to be disappointed with the pace of wheat export business amid tightened global supplies, another analyst said.

 

In Australia, where a severe drought has slashed production estimates, a new official forecast for the 2006-07 wheat crop estimated production at 9.7 million metric tonnes, slightly higher than an estimate from late October. The figure, however, is down 61% from actual output of 25.1 million tonnes last crop year ended March 31.

 

The revised estimate was within expectations and did not have a significant impact on trading during the day session, CBOT floor sources said.

 

Weather conditions, meanwhile, continue to be a concern for winter wheat crops, a source noted. Forecasts call for improvement in some, but not all, growing areas.

 

Next week, normal to above-normal precipitation is in store for north-central Texas, central Oklahoma and southeastern Kansas, the DTN Meteorlogix weather firm reported. Most of the moisture that occurs will be in the form of rain, the firm added.

 

But the western and southwestern Plains through the Texas Panhandle will get bypassed by the main precipitation track, Meteorlogix said.

 

In the Midwest, soft red winter wheat will undergo more moisture-related stress due to continued precipitation on already-saturated ground, the firm noted.

 

In other news, a U.S. senator planned to introduce legislation Tuesday that would direct the Bush administration to investigate whether U.S. wheat farmers had been harmed by any actions of AWB Ltd., Australia's monopoly wheat exporter, according to news reports.

 

An Australian government report issued last week found kickbacks AWB paid to Saddam Hussein's former regime during a U.N. oil-for-food program might have broken Australian laws.

 

 

Kansas City Board of Trade

 

KCBT led the downside but saw a light volume day without aggressive buying or selling, a floor source said.

 

"It was kind of a typical holiday market," the source said. "We don't want to read too much into it."

 

With crops going into dormancy and other fundamental news scares, trading will likely be sideways and range-bound for the next several days, the source added.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures were following CBOT activity for most of the day, a floor source said. UBS was noted as a seller, while JP Morgan and Fimat were noted buyers, he added.

 

Early in the session, there was some miller buying in the back months, the source said.

 

Volume overall was light without fresh news out, he noted.

 

"Welcome to December," he said.