May 10, 2007

 

US Wheat Review on Wednesday: Modest gains amid pre-report positioning

 

 

U.S. wheat futures carved out modest gains Wednesday as market participants squared up positions ahead of the release of a government supply and demand report Friday, traders said.

 

Chicago Board of Trade July wheat rose 1 cent to US$4.82 per bushel. Kansas City Board of Trade July wheat ended up 1 1/2 cents at US$4.77 1/2, and Minneapolis Grain Exchange July wheat finished 3 1/4 cents higher at US$5.13.

 

The advances came as the trade looked ahead to the release of the U.S. Department of Agriculture's May supply and demand report. Due out at 8:30 a.m. EDT Friday, it will include new estimates for U.S. all-wheat and all-winter wheat production, along with estimates for new-crop and old-crop wheat ending stocks.

 

There are bullish concerns that report will reflect yield losses from a hard freeze Easter weekend, analysts said.

 

Of 11 analysts surveyed by Dow Jones Newswires, the average all-winter wheat production estimate was 1.587 billion bushels, up from 1.298 billion in 2006. The average estimate for all-wheat production was 2.158 billion, up from 1.812 billion last year, according to nine analysts polled.

 

For hard red winter wheat production, the average analyst estimate was 974 million bushels, up from 682 million in 2006. The range of guesses was 770 million to 1.050 billion.

 

The average analyst estimate for soft red winter wheat production was 368 million bushels, down from 390 million in 2006. Guesses ranged from 335 million to 410 million.

 

In other news, an Egyptian purchase for 115,000 metric tonnes of U.S. soft red wheat gave futures some underlying strength in early trading, a CBOT floor broker said. Egypt's General Authority for Supply Commodities also bought 120,000 tonnes of Russian or Kazakh wheat.

 

There also was talk that Morocco is going to double its wheat imports in 2007-08, said Sid Love, analyst with Kropf & Love Consulting.

 

"There's demand that's going to start picking up," Love said. "We're going to have a big wheat crop, but we're also going to have high demand."

 

Funds bought an estimated 1,000 contracts at CBOT. In pit trades, Rand Financial sold 700 July. Fortis spread 800 July/September.

 

On Thursday, the USDA will release weekly export sales figures for the week ended May 3. Trade estimates range from 75,000 to 350,000 metric tonnes for old-crop wheat sales and from 25,000 to 125,000 tonnes for new-crop sales.

 

 

Kansas City Board of Trade

 

KCBT saw slow, light-volume activity during the day session, a floor trader said. There was some inter-market trading, buying CBOT and selling KCBT, he said.

 

Late advances in the CBOT corn market also provided some spillover support, the trader added. Market participants are mainly waiting for the supply/demand reports to come out Friday, he said.

 

There remain concerns about precipitation in HRW wheat areas of the Plains, an analyst noted. Another round of moderate to heavy rain fell in the Southern Plains on Tuesday, and additional showers and thunderstorms will remain in the area through Thursday, according to DTN Meteorlogix.

 

"Recent rains have brought both disease concern and flooding to some areas of the Southern Plains wheat country, so a drier weather trend would be welcome," the weather firm said.

 

 

Minneapolis Grain Exchange

 

There was a "very light volume, choppy trade" at MGE, a floor trader said. There was no main feature for the day and it seemed like the trade was biding time before the supply/demand report is release, he added.

 

"Things have calmed down a little bit before the report," the trader said.

 

A lower-than-expected wheat stocks estimate from Statistics Canada was seen as friendly, traders said. Canada pegged March 2007 all-wheat stocks at 15.831 million tonnes, below pre-report estimates that ranged from 17.6 million to 18.9 million tonnes.