April 13, 2006

 

US Wheat Review on Wednesday: Mostly lower; speculative interest fades

 

 

U.S. wheat futures closed mostly lower Wednesday as speculative and fund interest subsided and many traders were content to sit on the sidelines and wait for fresh market developments, traders and analysts said.

 

Basis May contracts, Chicago Board of Trade wheat settled 7 cents lower at US$3.60 1/2, Kansas City Board of Trade was up 1/4 cent at US$4.62 1/4 and Minneapolis ended 4 3/4 cents lower at US$4.33.

 

"It was just kind of a liquidation type of day - people getting ready for the long weekend coming up. And wheat's rallied pretty good in the last few days," said Jack Scoville, analyst and vice president of Price Futures Group in Chicago.

 

All commodity markets will be closed for Good Friday ahead of the Easter holiday, so traders will wind up their weekly business on Thursday.

 

The recent foray to new contract highs in Kansas City and Minneapolis and four-week highs in Chicago prompted traders to take a wait-and-see attitude ahead of weekly export sales Thursday and the long weekend. However, traders aren't looking for strong exports given the premium in U.S. prices versus other producing countries.

 

KCBT and MGE wheat futures made new contract highs this week on weather concerns and strong speculative buying, while CBOT markets traded to a four-week top. Many traders were content to take profits after such a large move, he said.

 

Conditions remain mostly favorable for the soft red winter crop in the Midwest, with adequate moisture in most areas and warm temperatures speeding development.

 

At the CBOT, scattered fund activity was seen on both sides of the market. Funds were net sellers of an estimated 300 contracts.

 

Fimat sold a net 100 May and 200 July, Citigroup Global Markets and J.P. Morgan each sold a net 100 May and Kottke sold 100 May.

 

On the buy side, Citigroup bought 300 July and R.J. O'Brien bought 100 July.

 

ADM spread 1,000 December/July contracts.

 

 

KANSAS CITY BOARD OF TRADE

 

KCBT May wheat popped to a new contract high of US$4.66 and July hit a new high of US$4.71 1/2 shortly after the open, though little follow-through buying was uncovered. Prices quickly fell under light selling pressure and remained there for most of the session until late buying lifted prices back up toward their highs.

 

Good spread trading was cited, with General Mills spreading 600 May/July. Fimat spread 600 July/May, ABN Amro spread 600, and Man Financial and Shay Grain each spread 800 contracts.

 

Adverse weather continues to provide solid support in the market, and traders are reluctant to take prices very low in such a bullish fundamental environment, a floor trader said.

 

Forecasts point to continued hot, dry conditions for the southern Plains HRW belt, which is expected to put further stress on the crops. Much of Kansas is in a moderate drought, while severe drought is being seen in Oklahoma and Texas growing areas. Moderate drought also covers much of Missouri and extends north of Kansas into southern and western Nebraska and western South Dakota, according to the Drought Monitor.

 

The National Weather Service six- to 10-day outlook for April 17-21 calls for mostly dry weather from the southern Rocky Mountains east to the southern Atlantic Coast.

 

Man Financial bought 700 July, ADM bought 500 July, Fimat bought 300 May, 300 July and 400 July 2007 contracts, Prudential Financial bought 500 May and 300 July, Refco bought 800 July and 500 December, UBS bought 300 July and 500 December and ABN Amro bought 400 July.

 

Prudential Financial sold 1,000 July, Refco sold 500 July and UBS sold 400 July, 500 September and 300 December.

 

 

MINNEAPOLIS GRAIN EXCHANGE

 

MGE wheat futures closed lower on light selling pressure as traders decided to take profits after the recent climb.

 

May was held to a quiet inside day on the charts.

 

Warm, dry weather this week is expected to favor spring wheat plantings in the northern Plains, sources said.