April 6, 2006
US Wheat Review on Wednesday: Ends up; kansas city board of trade, minneapolis grain exchange lead on supply concern
U.S. wheat futures ended higher Wednesday on light short covering, drought worries for the U.S. hard red winter wheat crop and flood fears for the U.S. spring wheat crop, brokers said.
New-crop 2006-07 Kansas City Board of Trade/Chicago Board of Trade July wheat and Minneapolis Grain Exchange/CBOT September wheat spreads posted new-high closes as worries about tight U.S. hard wheat supplies contrasted with ample U.S. soft red winter wheat stocks.
"We haven't solved the protein problem," said Charlie Sernatinger, analyst at O'Connor and Co.
Buying of KCBT and MGE U.S. wheat futures and selling CBOT wheat futures became popular last summer as demand for higher-protein U.S. food wheat began outpacing that for lower-protein U.S. wheat.
CBOT May wheat ended up 4 1/4 cents at US$3.47 per bushel while July wheat closed up 4 cents at US$3.60.
Speculative funds bought about 2,000 CBOT wheat futures contracts, brokers said. Man Financial bought 800 May, UBS and Rosenthal Collins each bought 500 May, the Refco division of Man Financial bought 300 July and sold 200 May, Iowa Grain sold 200 May and 200 July, and ABN Amro bought 200 May, brokers said.
In CBOT wheat spread trade, Tenco Inc. spread 500 December/July, they noted.
Early Wednesday, Informa Economics pegged U.S. 2006 winter wheat production at 1.454 billion bushels, down 45 million bushels from last year's final production tally.
Midday spot U.S. HRW and SRW Gulf barge bids were both down 2 cents per bushel Wednesday, cash sources said.
U.S. wheat export news was quiet, while Morocco tendered to buy 115,000 metric tonnes of soft European Union wheat.
In global wheat news, the French state grains board, Office National Interprofessionnel des Cereales, or ONIC, estimated French 2006 soft wheat plantings would rise 1.3% from last year and hard wheat plantings would jump 8.9%.
The USDA's attache in India revised India's marketing year 2006 (April-March) wheat production down 1 million tonnes to 72.0 million tonnes, due to abnormal weather conditions in February and March.
The post said India may import up to 2.0 million tonnes of wheat in the latter half of marketing year 2006/07 (April- March).
Pakistan lowered its 2005-06 wheat crop estimate to 20.5 million tonnes from the previous estimate of 22.0 million tonnes and last year's production of 21.6 million tonnes, due to poor growing weather, the agriculture minister said.
Australian wheat exporter AWB Ltd. (AWB.AU) said it has more wheat available for sale if extra demand comes from India. AWB now is executing the sale of 500,000 tonnes to India.
Kansas City Board of Trade
KCBT May wheat ended Wednesday up 7 3/4 cents at US$4.22 per bushel and KCBT July closed up 9 1/4 cents at US$4.27 3/4.
Warming temperatures, realization that key fields in western Kansas, Oklahoma and Texas had missed recent rains and might miss out on upcoming precipitation, along with short covering, spurred the gains, brokers said.
"With temperatures starting to move back up to more seasonal or above-seasonal levels, we could start to bring these production concerns back into the market once again after we've already removed most if not all of the weather premium over the last couple weeks," said Shawn McCambridge, a grain analyst at Prudential Financial.
The KCBT/CBOT July spread closed at a new high of 67 3/4 cents, premium KCBT, on Wednesday. The previous high close of 66 cents was set March 10.
"We had a protein problem in the old crop and we'll have a protein problem in the new crop, said O'Connor and Co.'s Sernatinger.
"It feels like the spreads are going to go to a US$1.00 premium to Chicago in the new crop, but flat price is anybody's price," he added. "It's a question of the final disposition of the HRW crop and weather."
Spot cash 11% and 14% U.S. hard red wheat basis bids were unchanged while 12% and 13% bids fell 2 cents, according to the KCBT.
Minneapolis Grain Exchange
MGE July wheat closed up 6 cents at US$4.11 1/2 and July wheat ended up 5 3/4 cents at US$4.17.
"Inter-market spreading (MGE/CBOT) was again a feature, and pretty much all the major houses took part," one MGE broker said. "Still, volume was not that large."
Concerns about a tightening 2006-07 U.S. hard wheat balance sheet spurred the spread, he and other brokers said.
The USDA on Friday forecast a 1% drop in U.S. spring wheat acres from last year's plantings. Moreover, Red River Valley flood concerns and forecasts for more rain this week in that area during the spring planting period accelerated worries.
The USDA on March 10 forecast the 2005-06 U.S. hard red spring wheat carryout at 141 million bushels, below the previous year's 159 million bushels.
The MGE September hard red winter wheat/Chicago Board of Trade September soft red winter wheat spread closed at a new high of 49 3/4 cents, premium MGE on Wednesday. The previous high close of 48 1/2 was Tuesday.
Cash U.S. spring wheat basis bids were steady to 10 cents lower Wednesday, cash sources said. Minneapolis wheat receipts totaled 94 railcars versus last year's 113 railcars. There were 2 durum receipts versus last year's 79 cars.