May 18, 2006


US Wheat Review on Wednesday: Up; kansas city board of trade spot contract at 9-year high



U.S. wheat futures settled higher Wednesday, with new-crop Kansas City Board of Trade July settling above US$5 per bushel and at the highest level on continuous charts since April 1997, on speculative buying and worries about tightening U.S. hard wheat supplies, brokers said.


Forecasts for hot, dry weather in the key U.S. hard red winter wheat belt into next week, a time when the crop is filling, underpinned the gains, they noted.


U.S. hard red winter wheat is exported and used to make bread.


The U.S. Department of Agriculture forecast last Friday that this year's U.S. HRW wheat crop would total only 715 million bushels, down from last year's crop of 930 million bushels, due to drought.


Minneapolis Grain Exchange and Chicago Board of Trade wheat futures also surged Wednesday, with both spot contracts hitting their highest levels since July 2002.


"On both Monday and Tuesday, we commented how there was risk for much warmer temperatures in the areas of the Plains where wheat is heading," said Bill Nelson, a grain analyst for AG Edwards & Sons, in a daily report.


"That can be detrimental to wheat yields," he added. "The temperature outlooks are getting warmer as the week progresses and the staying period is longer."


Good global wheat demand underpinned Wednesday's wheat gains, particularly amid recent suggestions of wheat import demand from Iraq and India.


Of note, Wednesday's wheat gains bucked pressure from losses in outside inflationary markets such as gold and crude oil.


CBOT July wheat futures ended up 18 1/2 cents at US$4.22 after setting a fresh two-year and contract high of US$4.25 per bushel.


Speculative funds bought about 14,000 contracts after market-on-close buying numbered as many as 5,000 lots, brokers said.


Earlier in the session, Fimat Futures traded 3,000 July, Man Financial bought 2,000 July and Citigroup bought 1,500 July, brokers said. Calyon Financial sold 1,000 July and Rand Financial sold a net 900 July.


Midday spot U.S. HRW Gulf barge bids were unchanged Wednesday while SRW bids fell 3 cents per bushel, sources said.


In global wheat news, the State Trading Corp. of India (512531.BY) said Wednesday that imports from Australia had been delayed over certification they are free from ergoty grains.


Ergot is a fungus whose infection can hit yield of the grain during cultivation. The tender for 500,000 metric tonnes wheat specified the cargoes should be free from ergot, the India company has noted.


In the Southern Hemisphere, Argentine farmers should plant at least 10% more wheat in 2006-07 than they did the previous year, the Agriculture Secretariat said Wednesday in its monthly crop report.


Argentina's 2006-07 wheat plantings will likely total between 5.6 million hectares and 5.9 million hectares, depending on climatic conditions. The lower forecast would put area up almost 11% while the higher figure would see an increase of almost 17% from the previous drought-hit season.



Kansas City Board of Trade


KCBT July wheat settled up 20 3/4 cents at US$5.06 1/2 after setting a nine-year and contract high of US$5.07 per bushel.


Spot cash 11%, 12% and 14% U.S. hard red wheat basis bids were unchanged Wednesday while 13% bids rose 1 cent, according to the KCBT.



Minneapolis Grain Exchange


MGE July wheat closed up 19 1/2 cents at US$4.78 1/2 after making a fresh contract high and 2-year top of US$4.80 per bushel.


Cash U.S. spring wheat basis bids were mixed Wednesday, up 5 cents to down 5 cents per bushel, cash sources said. Wednesday's Minneapolis wheat receipts totaled 71 railcars versus last year's 175 railcars. There were 25 durum receipts versus last year's 6 railcars.


The U.S. spring wheat crop, which is 79% planted - ahead of the 72% average seeding pace - has its own weather issues.


"An extended period of ... drier conditions is needed across the northeastern parts of the four-state region where topsoil moisture is still rated as surplus, and many areas remain well behind normal for planting progress," said the North Dakota Wheat Commission on Tuesday.


"However, replenishing rains will be needed soon across central and south central parts of North Dakota where some areas are approaching drought conditions," the commission added in a report. "The remainder of the region has generally experienced good planting and germination conditions with the exception of cooler than normal night time temperatures."