December 15, 2006

 

US Wheat Review on Thursday: Ends higher on export, spillover support

 

 

U.S. wheat futures closed with modest gains Thursday on a combination of several moderately supportive factors, including strength in neighboring markets and solid weekly export sales, analysts said.

 

Chicago Board of Trade March wheat settled 3 cents firmer at US$4.91 1/2 per bushel, Kansas City Board of Trade March wheat closed up 3/4 cent at US$5.09 1/2, and Minneapolis Grain Exchange March wheat ended 2 cents higher at US$5.08 1/4.

 

"There's a synergism at work," said Vic Lespinasse, a CBOT floor analyst with AG Edwards & Sons.

 

The U.S. Department of Agriculture reported weekly U.S. wheat export sales were 471,100 metric tonnes for the week ended Dec. 7, 17% above the previous week and 15% over the prior 4-week average. The sales were on the high end of trade expectations of 300,000 tonnes to 500,000 tonnes.

 

Major increases were reported for Nigeria, which bought 90,500 tonnes; Guatemala, which took 85,700 tonnes; and Japan, which bought 78,200 tonnes.

 

Spillover support from CBOT corn and soybeans also helped push U.S. wheat futures firmer during the day session, a CBOT floor trader noted. Wheat is seen as a follower in the grain market, he said.

 

Lespinasse agreed strength in corn and soybeans was "encouraging" for wheat.

 

Private analytical firm Informa Economics, meanwhile, estimated 2007-08 U.S. winter wheat planted acreage at 44.000 million acres, up 3.425 million from the 40.575 million estimated by the USDA in 2006. The estimate, however, was smaller than traders expected and turned out to be mildly bullish, a CBOT floor trader said.

 

Fund buying of an estimated 2,000 contracts was another supportive factor, traders said.

 

In CBOT pit trades, Man Financial bought 700 July, JP Morgan bought 1,000 March and spread 600 March-May.

 

There also are still concerns about dryness in the U.S. Southern Plains, analysts added.

 

More dry weather is expected in the U.S. Southern Plains wheat areas to finish out this week, although there are moisture prospects for a portion of the region during next week, the DTN Meteorlogix weather firm reported. The Meteorlogix forecast calls for no rainfall in the region Thursday or Friday, followed by a few showers in eastern Colorado, northwestern Kansas and southwestern Nebraska on Saturday.

 

Temperatures will remain in the much-above-normal category, the firm noted.

 

"Even though winter wheat has gone into dormancy, the dry pattern is concerning due to the lack of soil moisture in the region," Meteorlogix said.

 

Moderate to heavy rains of 0.5 to 2.0 inches benefited dry areas in South Texas last week, according to a Drought Monitor report issued Thursday by the U.S. Department of Agriculture, National Weather Service and National Drought Mitigation Center. But in Oklahoma, a re-assessment of the local water supply led to an official expansion of drought, the report stated.

 

"Moderate drought also stretched farther north into central Kansas due to persistent dryness," the report said

 

In other news, a total of 226,818 metric tonnes of grain was granted at Thursday's European Union intervention resale tender, including 67,545 tonnes of soft wheat, E.U. figures show. This season, the E.U. grain management committee opened tenders to sell intervention grain back on the internal market due to tight domestic supplies.

 

The grain isn't allowed to be granted below domestic or intervention prices.

 

 

Kansas City Board of Trade

 

KCBT wheat futures saw support from Informa's new wheat acreage estimate, a KCBT floor source said. The estimate was lower than the firm's previous forecast, he noted.

 

"People thought maybe supplies might not be as big," the source said. "It looks like the producers went to corn instead."

 

Weekly export sales data was not seen as particularly supportive because year-to-date sales are still lagging, he added. Forecasts that show rain for hard red winter wheat areas next week also were bearish, he said.

 

 

Minneapolis Grain Exchange

 

MGE saw "very light" volume trade during the day session and followed CBOT wheat futures higher, a floor source said. There was some spread trading, although it was not particularly heavy, he noted.

 

Weekly export sales were seen as moderately supportive because sales and inspection data during the past couple of weeks has seemed solid, the source added.