December 31, 2005

 

US Wheat Review on Friday: Ends mostly firm on year-end short-cover

 

 

U.S. wheat futures ended mostly higher Friday on late year-end short-covering, following early technical sales, in anticipation of long-only index fund buying, possibly next week, brokers said.

 

Talk that the long-only index funds could be injecting new investment monies and reweighing indices has buoyed U.S. wheat late this year. Still, Friday's gains were limited by quiet fundamental news in holiday-thinned markets on the last trading day of 2005.

 

U.S. wheat futures markets will be closed on Monday in observance of New Year's Day.

 

Moreover, traders look toward the Jan. 12 U.S. Department of Agriculture winter wheat plantings, quarterly stocks and final 2005-06 production data, which many analysts see as bearish for current soft red winter wheat prices.

 

CBOT March wheat closed Friday up 2 cents at US$3.39 1/4, well below this week's 2 1/2-month high of US$3.47, but above the 100-day moving average of US$3.35 1/4; and May ended up 1 1/2 cents at US$3.48 3/4.

 

Commodity funds were light net sellers after selling about 2,400 lots by 1134 CST. O'Connor and Co. was a late buyer of March after selling 800 March early. ABN sold a net 600 March, Citigroup sold 300 March and Fimat sold 400 March, brokers said. Calyon Financial bought 500 March while the RIS division of Man Financial spread 1,000 December/July.

 

Spot cash U.S. soft red winter wheat basis bids were steady to weak Friday, with a 5-cent loss in St. Louis, Missouri.

 

Friday's weekly U.S. wheat export sales were at the low end of traders' estimates, some traders noted.

 

The U.S. Department of Agriculture reported weekly U.S. wheat exports totaled 356,500 metric tonnes, at the low end of estimates ranging from 200,000 to 550,000 metric tonnes.

 

Analysts noted that the recent speculative-led rally in U.S. wheat futures had decreased the competitive pricing of U.S. supplies versus foreign wheat.

 

Overnight U.S. wheat export sales were quiet while the dollar was mostly higher Friday in thin trade after hitting a two-week high Thursday against the yen. A stronger dollar is bearish for U.S. wheat exports.

 

In global wheat news, Argentine farmers had harvested 71% of their crop by Thursday, below last year's rate of 81% collected, according to the Argentine Agriculture Secretariat.

 

The average yield last week dropped to 2.56 tonnes per hectare from 2.67 a week earlier, the Buenos Aires Cereals Exchange said earlier this week.

 

The exchange forecasts Argentine farmers will produce 11.4 million metric tonnes of wheat in 2005-06, down 47% from last year's record 16.345 million tonnes.

 

The USDA forecast Argentina's average yield this season at 2.39 tonnes/hectare and sees final output totaling 12.1 million tonnes.

 

 

Kansas City Board of Trade

 

KCBT March wheat settled up 1 3/4 cents at US$3.87 per bushel, below this week's 2 1/2-month high of US$3.92; and May ended steady at at US$3.79.

 

The KCBT/CBOT March wheat spread settled at 47 3/4 cents, premium KCBT, after closing Thursday at 48 cents.

 

Spot U.S. cash HRW wheat basis bids were steady to mixed Friday, with a 5-cent loss at the Texas Gulf and a 5-cent gain in Manhattan, Kan.

 

"Cash markets are weaker, as the result of recent movement, and slow export demand," said Country Hedging analyst Charles B. Soule. "The market needs consumptive business if recent gains can be maintained. U.S. wheat is not competitively priced."

 

Traders closely tracked reports of U.S. hard red winter wheat crop progress. Unusually warm temperatures this week followed recent arctic air, prompting crop concerns, they noted.

 

 

Minneapolis Grain Exchange

 

MGE March closed Friday up 4 cents at US$3.92 per bushel and May wheat settled up 3 1/4 cents at US$3.89 1/4.

 

Cash spring wheat basis bids were steady to weak Friday, with a 5-cent loss in Minneapolis and 10-cent loss in Duluth, Minn., sources said.

 

In related news, the MGE said late Thursday it had set record levels of spring wheat futures open interest and exchange-wide futures volume.

 

Open interest in spring wheat futures, traded at the MGE since 1883, set a record 42,333 contracts as of Wednesday's close, the exchange said.