April 20, 2006

 

US Wheat Review on Wednesday: Rainy forecasts pressure markets

 

 

Kansas City Board of Trade futures led the U.S. wheat markets lower Wednesday on forecasts for beneficial rains in drought-stricken areas of the southern Plains.

 

Basis July contracts, Kansas City Board of Trade fell 7 1/2 cents to US$4.51 a bushel, Chicago Board of Trade wheat settled 1/2 cent lower at US$3.67 3/4 and Minneapolis Grain Exchange wheat lost 1 1/4 cents to US$4.30 1/2.

 

Apparently there is less skepticism in the market than there was earlier this week that significant rains will fall over parts of Texas, Oklahoma and Kansas to give the hard red winter wheat crop a much-needed boost, traders and analysts said.

 

"There are more today (Wednesday) that are expecting some decent rainfall in the three-quarter inch to one-inch area in the southern Plains and moving up into the central Plains," said Shawn McCambridge, senior grains analyst at Prudential Financial in Chicago.

 

A cold front is expected to trigger showers, with potentially heavy rain developing in central and eastern parts of Texas and Oklahoma as the front stalls, the U.S. Department of Agriculture's Joint Ag Weather Facility said. Up to one inch of rain is possible in southern Oklahoma through north-central Texas on Thursday and Friday, with up to one-half inch in the Texas Panhandle, according to DTN Meteorlogix.

 

The National Weather Service six- to 10-day outlook for April 24-28 calls for drier-than-normal conditions from the corn belt south into the Delta and the Southeast, however.

 

The decline in wheat prices was less evident in Chicago, where only fractional losses were seen. Light pressure resulted from heavy options and spread trading, a trader said.

 

May wheat options expire on Friday.

 

The soft red winter crop, traded at the CBOT, remains in good shape, supported by beneficial moisture and favorable temperatures for crop development.

 

At the CBOT, J.P. Morgan sold 300 July, Calyon Financial, Citigroup Global Markets and Man Financial each sold 200 July, while Refco sold a net 100 July.

 

Goldenberg Hehmeyer bought 300 December and Shatkin Arbor bought 200 July.

 

Funds sold an estimated 500 contracts as of 1330 EDT.

 

 

KANSAS CITY BOARD OF TRADE

 

Forecasts for beneficial rains over the HRW belt from Friday and into the weekend caused traders to sell the market. While the crop needs substantial moisture to improve from the drought conditions in Texas and Oklahoma, even a little rain can go a long ways toward improving wheat conditions, a trader said, noting the crop's resiliency.

 

KCBT July was held to an inside day on the technical charts, with the high and low within Tuesday's range. The close of US$4.51 occurred near the 10-day moving average minor support area.

 

Refco bought 1,000 July wheat, Fimat bought 900 July and 400 December, Prudential Financial bought 200 May and 500 July and Man Financial bought 500 July.

 

Refco sold 550 May, 250 July and 100 December, Fimat sold 300 March, Prudential Financial sold 500 July and Man Financial sold 300 July.

 

Spread trading was active, with Man Financial spreading 1,200 July/May contracts at 6-6 1/2 cents and Shay Grain spreading 900 July/December from 8 1/2-10 cents.

 

 

MINNEAPOLIS GRAIN EXCHANGE

 

MGE wheat futures weakened slightly following the general weakness in Kansas City and Chicago, despite spring wheat plantings lagging year-ago levels and the five-year average.

 

Overall trade was choppy and uneventful and prices closed quietly lower, a source said.

 

The July contract hit a top of US$4.34 during the session, creating a triple-top area on the technical charts that may serve as nearby resistance.