January 19, 2006

 

US Wheat Review on Wednesday: Lower on lingering technical sales

 

 

U.S. wheat futures ended lower Wednesday on follow-through selling after Tuesday's poor technical close and on losses in Chicago Board of Trade soybean and corn futures, brokers said.

 

CBOT March wheat ended Wednesday down 6 1/4 cents at US$3.22 1/2, below its 50-day moving average of US$3.25 1/4, while May ended down 5 1/4 cents at US$3.33 1/2 per bushel.

 

Commodity funds entered the open-outcry session net short about 16,000 CBOT wheat futures and sold about 3,000 lots, brokers said. Citigroup sold 1,500 March and 200 May, brokers said. R.J. O'Brien and ADM each sold 400 May, FC Stonnee sold 400 March and Cargill Inc. bought 1,000 March.

 

Midday Gulf spot cash soft red winter wheat basis bids were steady Wednesday while cash interior basis bids were mostly steady, cash sources said.

 

In global news, Argentina's Secretariat kept its forecast for wheat 2005-06 wheat production at 12 million metric tonnes, down 16% from last year's record crop. Drought in major production areas, low wheat prices, high export taxes and rising input costs led farmers to plant 21% less than they did a year ago, sources said.

 

Argentine farmers have harvested more than 91% of this season's crop, the Secretariat said Wednesday.

 

Talk of possible freeze damage to Russian wheat crop was mostly discounted Wednesday at the CBOT as U.S. SRW prices remain well above world prices, CBOT sources said.

 

Meanwhile, a U.S. Department of Agriculture attache report forecast a 19% drop in autumn 2005 Ukraine winter wheat plantings due to dry weather.

 

"Approximately 1.4 million more hectares of land will be available for spring crops in 2006 as compared with 2005," the attache said.

 

"Most likely, farmers will increase plantings of spring barley, sunflower seed, soybeans, corn and spring wheat in 2006," the report said. "However, doubts exist if they will be able to fully compensate for the reduction in winter wheat plantings."

 

 

Kansas City Board of Trade

 

KCBT March wheat closed Wednesday down 2 1/2 cents at US$3.72 3/4 per bushel, above its 50-day moving average of US$3.71, while May ended down 2 1/2 cents at US$3.74 1/2.

 

The KCBT March/CBOT March wheat spread settled at 50 1/4, premium KCBT, after settling Tuesday at 46 1/2 cents, premium KCBT.

 

FC Stonnee bought 150 March and traded 100 July; Frontier Futures bought 400 July and sold 60 December; Man Financial sold 500 March, bought 100 July and bought 100 December; the Refco division of Man Financial sold 150 July; UBS bought 300 March; and ABN Amro bought 100 March and 500 September, brokers said.

 

Deferred KCBT new-crop futures again found support from U.S. hard red winter wheat crop concerns amid a severe drought in the U.S. Southern Plains despite forecasts for showers Friday, brokers said.

 

Texas late Tuesday said the state's winter wheat crop was 83% in poor to very poor shape while soil-moisture levels were extremely dry.

 

Kansas City spot cash bids for 12% wheat fell 1 cent Wednesday while midday HRW Gulf spot basis bids were steady, cash sources said.

 

U.S. wheat export news was quiet, while Jordan said Wednesday it was tendering to buy 100,000 metric tonnes of hard wheat, on Feb. 1.

 

Jordan last bought Black Sea and Russian wheat on Nov. 17.

 

 

Minneapolis Grain Exchange

 

MGE March closed Wednesday down 3 1/2 cents at US$3.82 1/2, above its 50-day moving average of US$3.78 1/2; and May wheat settled down 2 1/4 cents at US$3.84 1/4 per bushel.

 

Cash U.S. spring wheat basis bids were steady to 5 cents higher Wednesday, cash sources said.

 

Minneapolis rail receipts of wheat on Wednesday totaled 225 cars versus last year's 100 cars. Durum receipts totaled 76 cars versus last year's 64 cars.

 

Traders also noted talk of expanded wheat plantings in western Canada this spring.

 

"We're expecting a 5% to 10% increase in spring wheat and barley, and a similar 5% to 10% reduction in durum," said Bruce Burnett, the director of the CWB's weather and crop surveillance department.

 

While spring wheat and barley acreage may be up in 2006, Burnett said he didn't believe production would necessarily increase to the same extent. After two years in a row of above-normal yields, he said a return to more normal yields could be expected.

 

Statistics Canada estimates the country produced 18.9 million metric tonnes of spring wheat in 2005, 5.9 million tonnes of durum, and about 12.5 million tonnes of barley.