December 30, 2005

 

US Wheat Review on Thursday: Ends weak on year-end evening; cash eases

 

 

U.S. wheat futures ended lower on Thursday on year-end profit-taking after speculative buying led to 2 1/2-month tops this week in the nearby U.S. wheat futures contracts.

 

U.S. wheat futures markets will close at 1300 EST Friday and remain closed on Monday in observance of New Year's Day.

 

"We just didn't have the fund buying that lifted the market recently," one CBOT broker said, while others listed funds as light net sellers Thursday of bellwether CBOT wheat futures.

 

Moreover, traders noted that next week's trade would anticipate the Jan. 12 U.S. Department of Agriculture winter wheat plantings, stocks and production data, which many analysts see as bearish for current soft red winter wheat prices.

 

"Because of last fall's more-normal rainfall and high energy prices (attracted wheat) acres from other row crops, we are now expecting a 6% recovery in U.S. winter wheat seedings to 42.8 million acres, a 2.5 (million) advance from last year," said Jerry Gidel, a grain analyst at North America Risk Management Services Inc..

 

"Both hard and soft red plantings are expected to jump sharply by 1.06 million acres (to 31 million) and 1.3 million (to 7.45 million), respectively, with this year's seeding conditions in the central and eastern U.S. much improved," he said. "In contrast, white wheat's area is expected to be up slightly (100,000 acres) to 4.35 million because of marginally better soil conditions in the (Pacific Northwest)."

 

Double-digit losses Thursday in CBOT soybeans, on forecasts for better near-term rains in Argentina and speculative selling, also weighed on U.S. wheat futures, brokers said.

 

And U.S. cash wheat basis bids weakened Thursday on increased farmer sales after the recent futures rally led to a 5 1/2-month cash high price for SRW wheat, and the highest price since June 2004 for cash U.S. hard wheat.

 

Still, Thursday's wheat futures' losses were limited as traders anticipated an inflow of long-only index fund money early in 2006 as investors invest in a sector that has outperformed stocks and bonds recently.

 

CBOT March wheat closed Thursday down 8 1/4 cents at US$3.37 1/4 after setting a 2 1/2-month high of US$3.47; and May ended down 7 cents at US$3.47 1/4.

 

ADM bought 1,300 March, Fimat was a net buyer of at least 700 March, Iowa bought 500 March, the RIS division of Refco Inc. and UBS each sold 600 March and Prudential Financial sold 500 March, brokers said.

 

Overnight U.S. wheat export sales were quiet.

 

European Union free-market tenders were canceled this week amid the holidays.

 

In global wheat news, China's total grain harvest for 2005 was expected to reach a record 484 million metric tonnes, up 3% from last year, due to rising yields and despite land erosion and construction, the state media said. The country's wheat crop totaled 97.5 million metric tonnes, up from the USDA's forecast of 96 million.

 

However, China will likely face a shortage of grains next year as demand is expected to exceed output by 15 million metric tonnes, the official People's Daily reported, citing Agriculture Minister Du Qinglin.

 

A sharp reduction in Chinese purchases of U.S. soft red winter wheat this year, following good purchases last year, has helped depress export sales and CBOT SRW wheat prices, U.S. wheat traders noted.

 

 

Kansas City Board of Trade

 

KCBT March wheat settled down 5 cents at US$3.85 1/4 per bushel; and May ended down 4 3/4 cents at US$3.79.

 

The KCBT/CBOT March wheat spread settled at 48 cents, premium KCBT, after closing Wednesday at 44 3/4 cents.

 

ADM Investor Services sold 100 March, the RIS division of Refco bought 800 March and 200 July, FC Stonnee sold 350 March and 50 July, Goldenberg Hehmeyer sold 200 March, Man Financial bought 800 March and UBS sold 300 March and 50 July, brokers said.

 

In spread trade, UBS spread 300 KCBT March/July, they added.

 

 

Minneapolis Grain Exchange

 

MGE March closed Thursday down 4 1/2 cents at US$3.88 per bushel after matching Wednesday's 2 1/2-month high of US$3.93; and May wheat settled down 4 cents at US$3.86.

 

Minneapolis wheat rail receipts Thursday totaled 201 cars versus 265 cars last year.