May 26, 2007

 

US Wheat Review on Friday: Rallies on global crop concerns, carryout

 

 

U.S. wheat futures sailed to solid gains Friday, propelled by nervousness about unfavorable crop weather amid tight global ending stocks, market analysts and floor traders said.

 

Technical and fund buying elbowed prices higher, traders added.

 

Chicago Board of Trade July wheat climbed 10 cents to US$5.01 per bushel, the contract's highest close since May 15. Kansas City Board of Trade July wheat rose 9 1/4 cents to US$4.89 1/4, and Minneapolis Grain Exchange finished up 9 1/2 cents at US$5.25.

 

CBOT July wheat gained 29 3/4 cents on the week after closing at US$4.71 1/4 on May 18.

 

Fund buying of an estimated 2,000 contracts supported Friday's advances, a CBOT floor trader said. In pit trades, Shatkin Arbor bought 500 July. Man Financial bought 500 July and sold 500 July, while Tenco sold 500 July.

 

It was "just a very impressive rally," said Joe Victor, vice president of marketing for Allendale.

 

Dryness in Ukraine and Russia inspired nervousness among market participants, analysts said, noting the International Grains Council projects 2007-08 world ending stocks will be the lowest since 1981. The IGC pegs carryout at 115 million metric tonnes, three million tonnes lower than in 2006-07.

 

Temperatures in Ukraine stretched well into the 90s Fahrenheit on Thursday and are expected to stay in the 90s through the weekend, DTN Meteorlogix reported. Ukraine's agriculture ministry also acknowledged Friday that the drought had damaged crops and said 400,000 hectares had to be replanted as of May 24. So far, however, only 43,000 hectares have been replanted.

 

The damage appears to be even greater than the ministry's estimates. The local government of the Nikolaev region, for one, said the drought had destroyed 500,000 hectares of grain crops in that region alone.

 

"Out of the 500,000 hectares winter grains and 349,000 (hectares) spring grains planted in the region, crops on 500,000 hectares have been destroyed by the drought," a statement issued by the local government said. "The affected area is increasing every day."

 

Concerns about dryness in other countries, including Australia, added to the nervousness, a CBOT floor broker said. Meteorlogix called West Australia and Queensland "notably dry" and said the regions had "little prospect for relief" through the end of the month.

 

An early rally in French wheat futures helped create a bullish tone for the U.S. wheat markets, an analyst noted, although Euronext.liffe Paris-based milling wheat prices eventually finished steady to mixed amid profit-taking ahead of the weekend.

 

Looking ahead, the close of CBOT July wheat above solid technical resistance at US$5.00 should give bulls fresh technical strength, a CBOT floor broker said. Next week, the trade will be keeping its eye on weather developments in the Black Sea region, Victor said.

 

"The market's going to be very much interested to see how the weather in Russia and Ukraine is playing out," Victor said.

 

The CBOT, KCBT and MGE wheat markets will be closed Monday in observance of Memorial Day.

  

 

Kansas City Board of Trade

 

Speculative and technical buying triggered some buy stops that shoved prices higher, a KCBT floor trader said. Damaging, heavy rains that are hitting the U.S. Southern Plains also attracted buyers, he added.

 

The next five days will bring more thunderstorms to the Southern Plains, following on the heels of heavy, flooding rain this past week, according to the Meteorlogix forecast. The target area for storms will be mostly in Oklahoma and Texas, with more than two inches of rain total expected, the weather firm said.

 

"The rains threaten to slow harvest progress and reduce the quality of what has been, in the early stages, a good-quality wheat crop in Texas," Meteorlogix said.

  

 

Minneapolis Grain Exchange

 

MGE followed CBOT wheat futures to the upside, a floor trader said. Floor activity was largely quiet ahead of the Memorial Day weekend, although there were some spurts of activity, he added.

 

Strong new-crop export sales, released in the U.S. Department of Agriculture's weekly report Thursday, were seen to provide lingering support for prices, the trader noted. The USDA will release weekly export inspections data on Tuesday, delayed one day by the holiday.

 

In other news, seeding of the grain and oilseed crops in Western Canada was estimated to be 55% complete, which would be slightly behind the 10-year average of 64%, according to the Canadian Wheat Board's crop update for the week ended May 21. Warm, dry weather was needed in Alberta to encourage planting progress.