January 21, 2006


US Wheat Review on Friday: Ends up after two-sided day; kansas city board of trade leads



U.S. wheat futures ended mostly firm Friday after two-sided trade, led by late gains in Kansas City Board of Trade on concerns about tight U.S. hard red wheat supplies and local short-covering in Chicago Board of Trade soft red winter wheat, brokers said.


Good commercial buying of neighboring CBOT corn and soybean futures also lent support to CBOT wheat futures, brokers said.


Still, KCBT wheat futures led both early losses and late gains, following Thursday's rally that was sparked by oversold conditions, news of an Iraqi tender for 100,000 to 150,000 tonnes of optional origin wheat set to close on Jan. 28, and concerns about drought-stressed new-crop U.S. HRW wheat.


"We had a big run in Kansas City yesterday and the market is kind of hard-pressed to follow through here because these longer-range forecasts have increased precipitation - the 6-10 day and 11-15 day forecasts have more rain in the driest areas of the Southern Plains," said Dan Cekander, a grain analyst at Fimat USA.


CBOT March wheat ended Friday steady at US$3.26 1/2, above its 50-day moving average of US$3.25 1/4, while May ended up 1/4 cent at US$3.37 1/4 per bushel.


Commodity funds ended the session about even, brokers said. Goldenberg Hehmeyer bought 400 March, Man Financial bought 500 March and 100 May while selling 100 July and Merrill Lynch sold 200 July, brokers said.


In U.S. wheat export sales news, the U.S. Department of Agriculture reported Friday old-crop U.S. weekly wheat export sales of 351,800 tonnes, featuring hard and white wheats.


For the year, U.S. wheat export sales are 77% of USDA outlook versus the average of 80%, an analyst noted.


Most CBOT grain traders said Friday that there was little impact on Friday's CBOT grain markets due to Japan's announcement it would "put a hold" on U.S. beef imports after a recent shipment was found that may contain material considered at risk for mad cow disease.


Beef sale to Japan had just resumed Dec. 12 after a two-year embargo due to a finding of mad-cow disease in the U.S.


Mad cow disease is the common name for bovine spongiform encephalopathy, or BSE, a degenerative nerve disease in cattle that is linked to a rare but fatal nerve disorder in humans, variant Creutzfeldt-Jakob Disease.


In global wheat news, traders continued to eye reports of severe cold in Russia's wheat-growing region following this week's USDA attache forecast of a nearly 19% drop in Ukrainian winter wheat sowings.


Finally, Australian Prime Minister John Howard appeared to back away from support of monopoly exporter Australia AWB Ltd. as a government-appointed Royal Commission started hearings on whether AWB breached Australian law by paying kickbacks to deposed Saddam Hussein's regime, sources said.


AWB's monopoly involves exporting wheat worth more than AUS$4.6 billion (USUS$3.5 billion) a year. Also, the company exports and trades in other grains, offers a comprehensive range of financial products to farmers, and is one of Australia's biggest suppliers of rural merchandise and services.


The existence of Australia's wheat export monopoly was already scheduled to be reconsidered under a scheduled national competition policy review in 2010, but the news hit company shares this week.


AWB closed the week at AUS$5.21, down 18% from its high of AUS$6.33 on Monday, on heavy turnover of 4.7 million shares.



Kansas City Board of Trade


KCBT March wheat closed Friday up 1 cent at US$3.84 per bushel, while May ended up 1 1/2 cents at US$3.84.


The KCBT March/CBOT March wheat spread settled at 57 1/2 cents, premium KCBT.


FC Stonnee bought 170 March and 200 July, Goldenberg Hehmeyer bought 200 March, Frontier Futures sold 150 March, Benson Quinn bought 300 July and 100 December, Fimat bought 300 March and sold 300 July; Shay Grain bought 550 May and 100 September and ABN Amro bought 100 March and 200 July, brokers said.


In options trade, Fimat bought March US$4.00 and US$3.80 calls and sold March US$3.60 put options, brokers said.


Kansas City spot cash railcar basis bids for 12% wheat rose 2 cents Friday while midday HRW Gulf spot basis bids were steady, cash sources said.



Minneapolis Grain Exchange


MGE March closed Friday down 1/4 cent at US$3.89 3/4; and May wheat settled up 1 1/4 cents at US$3.91 1/2 per bushel.


Cash U.S. spring wheat basis bids were mixed Friday, cash sources said.


Minneapolis rail receipts of wheat on Friday totaled 134 cars versus last year's 137 cars. Durum receipts totaled 5 cars versus last year's 35 cars.