May 31, 2007

 

US Wheat Review on Wednesday: Jumps on Ukraine ban, US harvest delays

 

 

U.S. wheat futures charged to strong gains Wednesday, prodded by the suspension of new-crop grain exports from Ukraine and domestic harvest delays, analysts said.

 

Chicago Board of Trade July wheat climbed 19 3/4 cents to US$5.10 3/4 per bushel. Kansas City Board of Trade July wheat rose 19 3/4 cents to US$5.00 3/4, and Minneapolis Grain Exchange July wheat finished 15 1/4 cents higher at US$5.28 3/4.

 

Ukraine will allow the export of 900,000 metric tonnes of grain already held by traders, but there will be no exports of the drought-reduced 2007-08 crop until reserves are built, the government said. The ban shoved prices higher because the Black Sea has been an aggressive seller of wheat on the world market, analysts said.

 

The move gives confirmation that Ukraine's crop "is in trouble," said Louise Gartner, analyst with Spectrum Commodities. Ongoing dryness in Russia is also concerning, she added.

 

A few thunderstorms developed in western and central Ukraine Tuesday, although eastern areas were still dry, according to DTN Meteorlogix. Temperatures were above normal but not as hot as recent days.

 

The next three days, however, will bring in a new heat wave to eastern Ukraine and southern Russia, Meteorlogix said. Temperatures will then turn cooler, but dry conditions will remain, the weather firm said.

 

There also is a lack of pressure on prices from harvest in the U.S., Gartner said. Persistent, heavy rains in the Plains have delayed harvest there, sparking concerns about yield and quality loss, she noted.

 

Thunderstorms that hit central Nebraska Tuesday also brought up to one inch of rain to Colorado and Kansas, according to Meteorlogix. More storms will fire up in the region through Friday, bringing rainfall of up to one and one-half inches. The heaviest rain is headed for central and eastern Kansas, the weather firm said. The coming weekend will bring additional showers in Oklahoma and Texas, along with normal to below normal temperatures, "a cool and rainy outlook, which is unfavorable for crop maturation and harvest," Meteorlogix said.

 

A rally in CBOT corn gave wheat further strength, analysts said. Wheat has been following corn "very closely, especially Chicago wheat," one analyst noted.

 

Commodity funds were strong buyers of an estimated 7,000 contracts at CBOT, traders said.

 

Looking forward, harvest pressure will eventually start to weigh on prices, Gartner said.

 

"It's so difficult for me to be bullish going into harvest," she said. "It's not unusual to have these harvest delay rallies. I would say that ultimately harvest will prevail."

  

 

Kansas City Board of Trade

  

KCBT wheat futures felt support from ongoing harvest delays in the Southern Plains and concerns about damage to the crop, a floor trader said. With more rain headed to Kansas, the crop's quality potential could decline, he added.

 

The U.S. Department of Agriculture's weekly crop progress report lowered the good-to-excellent rating for winter wheat two percentage points to 57%. Kansas' good-to-excellent rating dropped three percentage points to 37%.

 

The ban of new-crop grain exports in Ukraine and the rally in CBOT corn also pulled prices higher, the trader said.

  

 

Minneapolis Grain Exchange

 

MGE was seen as a follower of activity at the CBOT, a floor trader said. There was a slight decline in condition ratings for the spring wheat crop, and that may have given prices some strength, he added.

 

Seventy-nine percent of the crop was reported in good-to-excellent condition, compared to 81% a week ago and 73% a year ago, according to the USDA. Eighty-nine percent of the spring wheat crop was emerged, compared to the five-year average of 76%, the USDA said.