May 22, 2008

 

US Wheat Review on Wednesday: Backpedals late ahead of upcoming harvest

 

 

U.S. wheat futures closed mostly lower Wednesday as the markets backpedaled in late dealings amid pressure from the impending winter wheat harvest, traders and analysts said.

 

Chicago Board of Trade July wheat fell 6 cents to US$7.78 per bushel. Kansas City Board of Trade July wheat slipped 3/4 cent to US$8.30, and Minneapolis Grain Exchange July wheat shed 1 3/4 cent to US$10.32 1/2.

 

The bias of the market is sideways to lower ahead of the upcoming harvest of a big crop in the Northern Hemisphere, a CBOT floor trader said. The world is expected to produce more wheat than ever before in 2008-09 due to expanded plantings and mostly favorable growing weather.

 

The late setback, which also was a feature Tuesday, is a classic sign of farmer hedging, said Jason Britt, broker and analyst at Central State Commodities.

 

"I think that continues to be a weight around the neck of this market," Britt said about hedging. "The prospects of the crop right at this moment look pretty darn good. These are still pretty good prices."

 

Wheat showed its weakness, as it ended lower despite solid gains in corn, soybeans, metals and new record highs in crude oil. Weakness in the U.S. dollar was considered to be a generally bullish factor for commodities.

 

"It really is a market that's exhibiting some weakness," Britt said about wheat.

 

It seemed as though traders stepped up inter-market spreading, buying CBOT corn and selling wheat, after July corn rose above US$6, Britt said. July corn closed up 17 1/2 cents at US$6.07 1/4.

 

 

Kansas City Board of Trade

 

News that Iraq bought 600,000 tonnes of U.S. hard red winter wheat, traded at the KCBT, was generally considered unsurprising, traders said. The business was expected and "anti-climactic" after speculation about the sales filtered through the market earlier this week, a trader said.

 

Some supportive concerns about dryness in the Plains are starting to creep into the market, said Brian Hoops, president of Midwest Market Solutions. Hot conditions, with temperatures approaching or exceeding 90 degrees Fahrenheit, will bring some stress to Southern Plains wheat while advancing late-stage development, according to DTN Meteorlogix.

 

"As we go into harvest, you want decent moisture with some fairly warm but not hot temperatures," Hoops said. "We need an optimum crop in the United States this year. The market's going to be very sensitive to any dryness or excessive heat threats."

 

Minneapolis Grain Exchange

 

MGE wheat futures were seen as a follower of CBOT wheat, with traders also watching corn, soy and energy markets, a MGE trader said. Traders are keeping an eye on the weather in the U.S. and Australia, where there are dryness concerns, he said.

 

The market will wait for the U.S. Department of Agriculture to issue its weekly crop progress report at 8:30 a.m. EDT Thursday. Wheat export sales are expected to be 250,000 to 600,000 tonnes.

 

There could be some positioning Friday ahead of the long Memorial Day weekend, the trader said.