January 24, 2006


US Wheat Review on Monday: Ends mostly lower; kansas city board of trade leads setback



U.S. wheat futures ended mostly lower Monday, led by losses in Kansas City Board of Trade March hard red winter wheat futures after early fund buying boosted the nearby KCBT contract to a 2-1/2 week high of US$3.89 per bushel, brokers said.


The setback in KCBT wheat followed last week's rally, led by nearby March, on an Iraqi tender for 100,000 to 150,000 tonnes of optional-origin wheat set to close on Jan. 28, they noted.


"There's interest in how the Iraqi tender will pan out," one broker said. "But the tight U.S. HRW old-crop story is getting tired, and with the nearby KCBT spread trading at about even money and a noted index net long presence in KCBT wheat, there is a chance to get hurt if the roll accelerates.


"Besides, the KCBT/CBOT spreads hit new highs last week, so there is reason to exit that spread," he added.


CBOT wheat futures were pressured by Syria's sale of 300,000 tonnes of wheat to Egypt, while weekly U.S. wheat export inspections, at 18.781 million bushels, were at the high end of estimates, brokers noted.


CBOT March wheat settled down 1/2 cent at US$3.26, above the key 50-day moving average of US$3.25 1/4; while May ended down 1/4 cent at US$3.37 per bushel.


Funds were light net buyers, with JP Morgan and Man Financial light buyers of March late and Fimat a light seller of about 200 March late. Earlier, the Refco division of Man Financial bought a net 400 March, Calyon Financial bought a net 200 March and locals were net sellers of March.


Cash U.S. soft red winter wheat midday barge bids fell 2 cents per bushel, sources said.


Traders noted China's General Administration of Customs reported Monday that the country's 2005 wheat imports fell to 3.54 million tonnes, down 51.2% on year.


CBOT wheat traders have noted that the lack of large Chinese purchases of U.S. SRW wheat last fall weighed on CBOT SRW wheat futures.


In other global news, the Buenos Aires Cereals Exchange forecast Argentine farmers would harvest 11.8 million tonnes of wheat during the 2005-06 wheat marketing year, up 200,000 tonnes from the previous forecast.


Farmers had collected 96% of the 2005-06 Argentine wheat harvest by Jan. 19, the Agriculture Secretariat reported Monday.


India's wheat plantings totaled 26.1 million hectares in the Nov. 1-Jan. 23 period, compared with 25.9 million hectares in the year-earlier period, the Ministry of Agriculture said Monday.


The Indian wheat crop is tentatively forecast at 74-76 million tonnes, with sources continuing to closely follow northern India rainfall.



Kansas City Board of Trade


KCBT March wheat closed Monday down 4 cents at US$3.80 per bushel, while May ended down 3 cents at US$3.81.


The KCBT March/CBOT March wheat spread settled at 54 cents, premium KCBT, after closing Friday at a new high close of 57 1/2 cents, premium KCBT.


FC Stonnee bought 400 March and 200 December while selling 200 May and 200 July; Fimat sold a net 300 March and 50 July; Man Financial bought a net 200 March and 100 July, Prudential sold a net 100 March and 100 July; the Refco division of Man Financial bought a net 100 March and sold 300 July and Shay Grain bought a net 100 March, brokers said.


Kansas City spot cash railcar basis bids for 12% wheat were steady Monday while midday HRW Gulf spot basis bids firmed, cash sources said.


Traders continued to eye reports about the drought-stricken HRW crop.


Forecasts on Monday called for light rains across the northern HRW belt on Thursday and Friday and across the southern regions next weekend, following light rains this past weekend, according to Joel Burgio, meteorologist at Meteorlogix weather service.


"There's nothing particularly different from what we saw late last week," he told Dow Jones Newswires on Monday. "In this 10-day period, it's pretty much the same pattern we've been under, with every 3-4 days the chance for a few light showers."


Meanwhile, wheat specialists in Texas and Oklahoma, two key U.S. winter wheat producing states that have been hit by drought, issued crop updates.


"Most areas of the state have received less than 0.4 inches of rain since last October," said Jeff Edwards, small grains extension specialist at Oklahoma State University in the Jan. 20 wheat production newsletter.


"In many cases, this minimal rainfall will be enough to keep wheat plants hanging on, but will not be enough to encourage additional tillering or forage growth for grazing," he noted.


"I am an optimist by nature, and I am not ready to write off our wheat crop just yet," Edwards said. "Certainly, late-planted fields that only had partial emergence due to dry weather will have minimal yield potential. Issues that will be faced by late-emerging wheat include lack of sufficient cold weather for vernalization (exposure to cold temperatures that causes physiological changes in the wheat that allows it to later flower) and reduced tillering.


"If we can catch a few more snows and/or rains on well-established wheat, we may still go into the spring of 2006 with a decent crop," Edwards said.


"Further, while it is no consolation for stocker producers, reduced grazing in the fall of 2005 will likely be of benefit to the grain crop of 2006," he added.


Meanwhile, small grain specialists at Texas cooperative extension, Texas A&M University, wrote on Jan. 13: "We still have several weeks before any summer crop will need to be planted and wheat is extremely resilient to adverse conditions. Because of this, we can afford to wait another few weeks to see what the wheat crop will do, if we get rain. With most of the state and region suffering from drought conditions, it is possible the wheat prices will be higher and lower yields can still profitable."



Minneapolis Grain Exchange


MGE March closed Monday down 2 cents at US$3.87 3/4; and May wheat settled down 1/2 cent at US$3.91 per bushel.


Cash U.S. spring wheat basis bids were steady to 15 cents lower on Monday, cash sources said.


Minneapolis rail receipts of wheat on Monday totaled 137 cars versus last year's 132 cars. Durum receipts totaled 175 cars versus last year's 128 cars.