December 9, 2005

 

US Wheat Review on Thursday: Ends mostly weak; USDA data awaited

 

 

U.S. wheat futures ended mostly lower Thursday, led by speculative and technical sales at the Chicago Board of Trade and Kansas City Board of Trade ahead of Friday's U.S. Department of Agriculture 2005-06 ending stocks data, brokers said.

 

The break, to fresh contracts lows at the CBOT, accelerated on renewed signs of good global wheat supplies - particularly after the European Union reported at midday it had granted export licenses for 277,500 tonnes of subsidized free-market wheat at EUR7.00 per tonne, well above last week's 30,500 tonnes at EUR5.00, the level seen for the past month, they noted.

 

The selling in KCBT pressured the KCBT/CBOT March spread that, along with buying high-protein MGE futures and selling CBOT wheat, has been popular since this summer as demand for higher-protein U.S. food wheat outpaces that for lower-protein U.S. wheat.

 

The KCBT/CBOT March wheat spread settled Thursday at 49 1/2 cents, premium KCBT, after closing Wednesday at 51 3/4 cents.

 

"The spread has been wandering lately and just resting near the highs," one wheat broker said. "It's hard to know if patience is wearing thin as this long-running enterprise isn't really doing anything."

 

Most wheat traders did not expect the USDA to report anything Friday that would substantially change the high-protein/low protein wheat differential.

 

They also forecast the government would slightly cut its 2005-06 U.S. wheat end-stocks estimate to 524 million bushels from last month's estimate of 530 million.

 

CBOT March closed Thursday down 1 cent at US$3.12 1/4 after setting a new contract low of US$3.09 1/2; and new-crop September also set a new contract low of US$3.37 before closing down 2 1/2 cents at US$3.38 1/2.

 

CBOT December wheat closed down 1 3/4 cents at US$2.95 1/2 per bushel after setting a fresh contract low of US$2.94 3/4.

 

Commodity funds ended the session about net even after selling early. Rand Financial was a late buyer of 500-600 March wheat, brokers said. Earlier, the RIS Division of Man Financial sold 400 March, while Prudential Financial and Calyon Financial were also light sellers of March.

 

In spread trade, FC Stonnee spread 1,000 March/July.

 

There were 612 deliveries posted Thursday against CBOT December wheat, with ABN Amro the largest stopper of 282 lots and the last date available of Dec. 7.

 

Cash spot U.S. SRW wheat basis bids were mostly steady Thursday, and spot midday Gulf SRW wheat basis bids were steady, grain sources said.

 

The USDA reported Thursday weekly U.S. wheat export sales totaled 451,400 metric tonnes, within analysts' estimates of 350,000 to 500,000 tonnes. The sales included 202,000 tonnes to Iraq, a former top U.S. wheat customer that has emerged as a strong buyer this year.

 

In overnight U.S. wheat export news, Japan bought 45,000 tonnes of U.S. wheat in an overall tender of 125,000 tonnes and South Korea said it would buy 22,000 tonnes of U.S. wheat Friday.

 

In other global wheat news, the E.U. reported offers into 2005-06 E.U. grain intervention climbed 936,995 metric tonnes for the week ended Dec. 4 to 4.686 million tonnes.

 

Most of the rise came from an increase in Hungary, where offers climbed by 601,697 tonnes to 2.133 million tonnes and Poland where offers rose by 105,864 tonnes to 640,807 tonnes.

 

Of the total E.U. intervention amount, wheat climbed 256,161 tonnes on the week and now accounts for 1.957 million tonnes or 47% of the total grain.

 

The E.U.'s grain management committee also granted licenses to transfer 134,820 metric tonnes grain to Spain on Thursday in continuing efforts to alleviate this year's shortage due to drought.

 

In India, analysts forecast light wheat imports in 2006; one analyst projected an import of 1.0 million tonnes of wheat early next year with the government likely placing import orders in December itself.

 

U.S. wheat traders have speculated that India will need to import wheat due to low stocks before its crop year ends March 31, while the Indian government has denied the need to import wheat near-term.

 

 

Kansas City Board of Trade

 

KCBT December wheat settled down 4 1/2 cents at US$3.57 1/2, and March wheat ended down 3 1/4 cents at US$3.61 3/4, below the 100-day moving average of US$3.64 1/2 and above 200-day moving average of US$3.60 3/4.

 

ADM Investor Services sold 1,500 March while Man Financial traded about 500 March and 100 May, Prudential traded 100 July and bought 50 March and Shay Grain sold 200 March.

 

In spread trade, RIS Division of Man Financial spread 100 March/July and FC Stonnee sold 100 July/March.

 

Some deferred KCBT wheat found slight support from winterkill fears amid cold U.S. Southern Plains temperatures. Snow-cover protection in some of the coldest areas and/or talk of increased planted HRW acreage may be tempering some of the futures market's gains, traders said.

 

Moreover, meteorologists said dry conditions would linger across the droughty southern HRW belt for the next seven days while midday forecasts called for cool temperatures, after weather models Thursday morning showed conflicting signs, brokers noted.

 

There were nine deliveries posted Thursday against KCBT December wheat.

 

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

 

 

Minneapolis Grain Exchange

 

MGE December wheat ended steady at US$3.63, and MGE March closed down 1/2 cent at US$3.69 1/4 per bushel.

 

Commercial buying underpinned the market despite pressure from lower CBOT and KCBT futures, brokers said.

 

There were 157 deliveries posted against MGE December wheat Thursday.

 

Cash U.S. spring wheat bids were mixed Thursday amid farmer sales, while Minneapolis wheat rail receipts Thursday totaled 226 cars versus 133 cars last year.