January 12, 2007

 

US Wheat Review on Thursday: Bounces higher with CBOT corn support

 

 

U.S. wheat futures ended higher Thursday in a bounce from recent declines and with spillover support from the neighboring corn market, sources said.

 

Chicago Board of Trade March wheat ended 7 cents higher at US$4.56 1/2 a bushel, Kansas City Board of Trade March wheat closed up 9 cents at US$4.81 1/4, and Minneapolis Grain Exchange March wheat finished up 11 3/4 cents at US$4.82.

 

CBOT corn is seen as the leader of wheat, and an early corn rally carried wheat along into positive territory, a floor trader noted.

 

Wheat futures also are in an oversold condition and were due to bounce higher, an analyst added.

 

In CBOT pit trades, Man Financial bought 500 March. UBS sold 500 March, while Iowa Grains sold 500 July. Rosenthal spread 600 March-May, while Fimat and Tenco each spread 500 May-March.

 

The CBOT, in an announcement on the trading floor, said the e-cbot system went down at 2:11 p.m. EST. All day orders submitted after that time were canceled, the exchange said.

 

In other activity, there was short-covering after sharp declines in recent sessions and as traders were looking ahead to Friday's release of U.S. Department of Agriculture reports on winter wheat seedings, quarterly stocks and carryout, traders noted.

 

The average expectation for U.S. winter wheat seeded area for 2007 is 44.2 million acres, according to a Dow Jones Newswires survey of 12 analysts. In 2006, the USDA pegged winter wheat seeded area at 40.575 million acres.

 

The average expectation for U.S. wheat ending stocks for the 2006-07 marketing year is 456 million bushels, according to a survey of 10 analysts. In December, the USDA pegged ending stocks at 438 million bushels.

 

Of nine analysts surveyed, the average estimate for Dec. 1 quarterly stocks is 1.315 billion bushels, down from the USDA's September estimate of 1.743 billion bushels.

 

Producers likely planted more wheat last fall after the increase in wheat futures prices, and slow export sales should prompt the USDA to raise carryout, analysts said. The expectations are bearish for trading, sources noted.

 

The USDA on Thursday reported weekly export sales for the week ended Jan. 4 totaled 244,400 metric tonnes, within analysts' expectations of 200,000 tonnes to 350,000 tonnes. The sales were 81% above the previous week but 31% under the prior 4-week average.

 

Sri Lanka bought 114,000 tonnes, its first purchase since the 2000-01 marketing year, the USDA noted. Egypt bought 60,000 tonnes, and Nigeria bought 38,000 tonnes, according to the USDA.

 

The sales had little affect on trading because they were expected, floor sources noted.

 

In other news, Brazil's 2006 wheat crop is 54% less than initially expected at 1.7 million metric tonnes, according to the National Commodities Supply Corp., or Conab.

 

A late winter cold snap in September destroyed much of the crop in Rio Grande do Sul and Parana states, the top two producers. Previous estimates on the damage suggested Brazil had harvested some 2 million tonnes of wheat, or as much as 2.4 million tonnes in October.

 

Four million tonnes were initially projected.

 

Brazil consumes roughly 10.5 million tonnes of wheat annually and will increase wheat imports in 2007, mostly from Argentina.

 

 

Kansas City Board of Trade

 

KCBT wheat futures followed CBOT corn throughout the day session, a floor source said. The gains were larger than expected because corn's rally was stronger than expected, he noted.

 

There also was bullish talk that Iraq may have bought more wheat, the source added.

 

Weather, on the other hand, was fundamentally bearish for wheat futures prices, traders said.

 

South-central Kansas through central Oklahoma and north-central Texas will receive up to one inch of rainfall this weekend as part of a wintry storm that moves through the U.S. Southern Plains, the DTN Meteorlogix weather firm reported.

 

The Meteorlogix forecast calls for the storm to produce two to six inches of snow in the Southern Plains and up to two inches of rain in the Mississippi Delta through the lower Ohio Valley. In the central Midwest, a mix of rain, freezing precipitation, and snow will occur, the firm said.

 

Following the wintry precipitation, cold Arctic air will settle into the Plains through the Midwest, possibly reaching the northern Delta, the firm noted. Winter wheat in the Plains, however, will have little or no damage from the storm this weekend, Meteorlogix added.

 

"The coldest temperatures will be in areas with heaviest snow cover, thus protecting the wheat from cold-weather stress," the firm reported. "Moisture will continue to be beneficial for the wheat areas."

 

 

Minneapolis Grain Exchange

 

Early short-covering uncovered some buy stops that helped push MGE wheat futures higher, a floor source said. There also was some speculative buying, he added.

 

Overall, MGE futures prices were following strength in CBOT corn, he noted.

 

Trading volume was moderate, the source said.