December 10, 2005

 

US Wheat Review on Friday: Ends lower on bearish USDA world data

 

 

U.S. wheat futures ended lower Friday on bearish U.S. Department of Agriculture global wheat crop and ending stocks data, with nearby Chicago Board of Trade contracts closing near their fresh contract lows, brokers said.

 

The USDA Friday raised its global 2005-06 wheat production estimate to 615.33 million metric tonnes from last month's estimate of 610.58 million. Subsequently, global 2005-06 wheat ending stocks were raised to 143.4 million metric tonnes from last month's estimate of 139.5 million.

 

The gains followed increased production numbers for Australia, up 1.5 million to 24 million metric tonnes; Canada, up 1.3 million to 26.8 million; and China, up 1 million to 96 million.

 

The USDA left unchanged its 2005-06 Argentine, Russian and Indian crop production estimates, slightly lowered its European Union estimate to 122.52 million tonnes from last month's 122.67 million; and slightly raised its FSU-12 estimate to 92.86 million metric tonnes from last month's 91.56 million.

 

On the U.S. balance sheet, the USDA left unchanged its 2005-06 wheat ending stocks estimate at 530 million bushels and only slightly altered its U.S. wheat class balance sheets. The USDA cut U.S. hard red winter wheat stocks by 2 million bushels to 173 million and raised hard red spring ending stocks by 2 million to 121 million.

 

On the export front, the USDA boosted its U.S. HRW export estimate by 5 million bushels to 444 million and cut its durum wheat export estimate by 5 million to 30 million, leaving total U.S. 2005-06 wheat exports unchanged at 1 billion bushels.

 

CBOT March closed Friday down 4 3/4 cents at US$3.07 1/2 after setting a new contract low of US$3.07, and CBOT December wheat closed down 2 1/2 cents at US$2.93 per bushel after setting a fresh contract low of US$2.92 1/2.

 

Commodity funds sold about 2,000 to 2,400 lots, led by sales of 500 March from Calyon Financial and Refco Inc.

 

Light stops were hit late, leading nearby CBOT contracts to close near their session lows, brokers said.

 

There were 328 deliveries posted Friday against CBOT December wheat, with Banc of America Securities stopping 139 lots and ABN Amro stopping 189 lots.

 

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

 

In overnight U.S. wheat export news, South Korea bought 22,000 metric tonnes of U.S. wheat while the USDA's CCC bought 4,890 metric tonnes of northern spring wheat for Nicaragua.

 

In global wheat news, India said in a mid-year economic review that its wheat stocks are adequate to meet the country's requirements until the next marketing year starting April 2006.

 

U.S. wheat traders have speculated that India will need to import wheat due to low stocks before its crop year ends March 31.

 

Traders also eyed harvest reports from key Southern Hemisphere producers Argentina and Australia.

 

Argentine farmers had collected 22% of the country's 2005-06 wheat harvest by Thursday, down from last year's 35%, the Agriculture secretariat reported Friday.

 

The average yield last week was 2.35 tonnes per hectare, below the USDA's last forecast of an average yield this season at 2.39 tonnes/hectare.

 

 

Kansas City Board of Trade

 

KCBT March wheat settled down 3 3/4 cents at US$3.58, below its 200-day moving average of US$3.60 3/4, and December ended down 5 1/2 cents at US$3.52.

 

Man Financial sold 1,000 March while Prudential Financial and ADM Investor Services each sold 800 March. Shay Trading bought a net 80 March and 100 December 2006 while selling 100 July.

 

Spread trade was relatively modest, with UBS spreading 200 March/July and Frontier spreading 300 May/July, brokers said.

 

The KCBT/CBOT March wheat spread settled Friday at 50 1/2 cents, premium KCBT, after closing Thursday at 49 1/2 cents.

 

Two redeliveries were posted Friday against KCBT December wheat.

 

Cash spot U.S. HRW cash basis bids were mixed to weak Friday; spot midday U.S. Gulf HRW basis bids fell 1 cent per bushel, sources said.

 

Traders continued to eye reports from the U.S. Southern Plains HRW belt after bitter temperatures this week raised fears of crop damage. Meteorologists said dry conditions would linger across the dry southern HRW belt for the next seven days while forecasts called for warmer weekend temperatures.

 

The U.S. SRW wheat crop is generally in much better shape after a wetter autumn allowed better root establishment.

 

 

Minneapolis Grain Exchange

 

MGE March closed down 2 1/2 cents at US$3.66 3/4 per bushel and December wheat ended steady at US$3.63.

 

No deliveries were posted against MGE December wheat Friday.

 

Cash U.S. spring wheat bids were mixed Friday, while Minneapolis wheat rail receipts Friday totaled 234 cars versus 291 cars last year.