April 25, 2012
US wheat rise 1% over colder forecast
Supported by short covering and by forecasts for another cold snap in the US that could pose a threat to crops, US wheat grew 1% on Monday (Apr 23).
Corn also rose 1% due to the cold weather forecasts and to persistent talk that China bought US corn. Soy finished lower and down from a seven-and-a-half month high.
Grains showed impressive independent strength in the face of bearish macroeconomic indicators including a firm dollar, falling equities, crude oil and precious metals.
"First of all wheat and corn were oversold and there is covering from that. Secondly I think people are hesitant now to sell wheat with cold weather around, there is concern we may see production declines," said Shawn McCambridge, analyst for Jefferies Bache.
Friday's Commodity Futures Trading Commission (CFTC) commitments of traders report showed that as of last Tuesday, speculators added 6,896 contracts to their net short position in CBOT wheat. They were net short 96,705 contracts.
Wheat and corn futures fell sharply on Friday and soy surged. The fund selling of grains and buying of oilseeds on that day left each market vulnerable to a correction or reversal during Monday's trading session.
Soy eased on profit-taking after surging to seven-and-a-half month highs the previous session. Friday's surge was related to waning prospects for this year's South American crop due to drought, the chance for dwindling US soy supplies this year and to persistent buying of soy by China, the world's largest soy importer.
CBOT May wheat was up US$0.0925 per bushel at US$6.25, May corn was up US$0.10 at US$6.22-1/2 and May soy was down nine and one half at US$14.37-1/4.
Although US winter wheat futures contracts traded on the Chicago Board of Trade and Kansas City Board of Trade rose, the thinly traded spring wheat futures at the Minneapolis Grain Exchange were nearly flat and Paris Euronext wheat fell.
MGEX May spring wheat was up US$0.75 at US$7.91-3/4. KCBT May wheat was up nine-1/4 at US$6.35-1/4. European benchmark wheat was down due to the forthcoming expiry of the last old crop contract for the current season and a broad sell off on financial markets fuelled by concerns over a recession across the region.
Euronext May milling wheat was down EUR1.75 (US$2.31) per tonne at EUR214.75 (US$283) per tonne. Agricultural meteorologists on Monday said there was the potential for another spell of cold weather in the US by the weekend.
John Dee, meteorologist for Global Weather Monitoring, said the cold snap probably would not harm crops. On Monday the confidence was low for freezing temperatures then.
"It's too early to know for sure, but there could be some freezing temperatures by Friday and Saturday in Michigan, northern Indiana and Ohio, then north of I-80 by early next week," Dee said.
The USDA at 3:00 p.m. CDT (2000 GMT) on Monday will release updated weekly crop progress numbers.
Some traders said the US winter wheat condition rating may decline from the 64% good-to-excellent condition rating of last week. Corn and soy continued to find support from talk China was buying US produced commodities and the USDA on Monday said exporters had sold 120,000 tonnes of corn and 165,000 tonnes of soy to unknown destinations.
Traders said the sales probably were made to China and they expect more sale announcements soon. Active planting of the US corn and soy continues and US farmers are expected to seed the largest area to corn in 75 years. The early corn plantings may lead to a doubling of corn stocks next year and also help cushion the bullish impact of dwindling stocks this season due to early harvest.
A Reuters poll of 17 analysts indicated that USDA on Monday would show US 2012 corn planting was 31% complete, the second fastest on record, and soy planting was at a record 4% complete.
The USDA has only released its estimate of soy planting for the third week in April once before, in 2007.
