June 16, 2006

 

US Wheat Review on Thursday: Mixed; technical buying vs corn, harvest

 

 

U.S. wheat futures ended mixed Thursday, with most active Chicago Board of Trade September and December soft red winter wheat futures contracts pressured by losses in CBOT corn futures, brokers said.

 

Corn futures were pressured by heavy speculative fund sales, estimated by some CBOT brokers as totaling 15,000 to 20,000 futures contracts; Informa Economic's estimate for U.S. corn plantings at 80.329 million acres; and forecasts for rains in the U.S. Corn Belt into this weekend.

 

Very little CBOT wheat/corn futures spreading was noted, brokers said.

 

Kansas City Board of Trade hard red winter wheat futures ended up on technical buying despite U.S. harvest pressure and amid little fresh news from key U.S. hard wheat customer Iraq about any possible wheat buy tender, they added.

 

The head of Iraq's grain board told London conferees Wednesday that Iraq would consider more EU wheat suppliers after buying wheat from Germany earlier this year.

 

Minneapolis Grain Exchange spring wheat futures also ended higher Thursday on late technical buying amid near-oversold technical signs and good net weekly U.S. spring wheat export sales.

 

The gains followed early losses after Informa estimated U.S. 2006 spring wheat acres at 15.039 million, above the USDA's March estimate of 13.899 million.

 

The Informa estimate preceded the USDA's June 30 acreage report. U.S. 2006 wheat production estimates won't be released in the June 30 report, but will be announced in the USDA's crop report July 12.

 

September/July wheat spreads continued ahead of the June 30 first notice day for deliveries against the three U.S. July wheat futures contracts.

 

CBOT July wheat settled up 1/4 cent at US$3.61 1/2 and September closed down 1 1/4 cents at US$3.76 1/2 a bushel.

 

Speculative funds were net buyers of about 1,000 to 2,000 CBOT wheat futures contracts after buying a net 1,000 lots by 1330 EDT, brokers said.

 

Iowa Grain bought 1,000 December, Rand Financial bought 300 July and 100 September, and Rosenthal Collins sold 400 December, they noted.

 

CBOT wheat spread trade continued ahead of the June 30 first notice day for the three U.S. July wheat futures contracts.

 

Fimat spread 1,000 September/July, DT Trading spread 700 September/July and FC Stonnee spread 400 July/September, they noted.

 

The September/July spread closed at 15 cents after moving out to 18 cents on Wednesday. Full carry in CBOT soft red winter wheat is estimated at 13 1/2 cents, but some traders still expect big deliveries on June 30 against July as it is the last month to deliver CBOT SRW wheat with five parts per million vomitoxin.

 

Vomitoxin, a product of Fusarium graminearum, or head scab, can sicken humans and animals.

 

Midday spot U.S. FOB hard red winter wheat barge bids rose 5 cents Thursday while spot CIF soft red winter wheat bids rose 3 cents, cash sources said.

 

In global wheat news, European cash wheat prices were mostly unchanged as cooler temperatures and forecasts for more light rains have eased crop production worries.

 

Indian officials said the government was considering substituting wheat imports with coarse cereals to run the country's subsidized food grain sale programs.

 

Each Indian household is entitled to 35 kilograms of food grain every month at subsidized rates. Until now, the government has only been selling wheat and rice under the subsidized sales program.

 

Strategie Grains, a monthly analytical report released Thursday revised its June 30 European Union 2005-06 wheat ending stocks estimate by 500,000 tonnes to 17.3 million tonnes.

 

In other U.S. wheat futures news, traders noted that the CFTC recently said that it would review the classifications in its weekly commitment of traders report following its recent changes in currency COT classifications.

 

Some U.S. wheat futures traders have worried that the the increased presence of index funds, which generally buy and hold futures, skew the report as the CFTC has classified them as commercials in the weekly U.S. wheat COT reports.

 

The CFTC on June 2 posted on its web site a notice that it had reclassified several traders in the foreign currency futures and options report. The announcement can be read at http://www.cftc.gov/cftc/cftccotreports.htm?from=home&page=cotcontent.

 

In that announcement, the CFTC said, "the Commission has committed to review several broad aspects of the COT report. That effort is independent of today's updates and will be the subject of a Federal Register notice soliciting public comment, including suggestions as to possible changes in the COT reporting system, to be released in the near future."

 

 

Kansas City Board of Trade

 

KCBT July wheat ended up 3 cents at US$4.64 and September ended up 3 1/2 cents at US$4.72 3/4.

 

ADM Investor Services was a net seller of 500 September before midday while Man Financial sold 400 July, brokers said.

 

Frontier Futures spread 200 September/July, they added.

 

Spot cash 11% through 14% U.S. hard red wheat basis bids were unchanged Thursday, according to the KCBT.

 

The Kansas Wheat Harvest Report on Thursday noted active cutting amid clearing mid-week weather, while KCBT wheat traders said Kansas farmers were reporting yields in the 30- to 50-bushel per acre range. Cutting was beginning as far north as the Kansas-Nebraska border, they added.

 

The U.S. hard red winter wheat harvest usually extends into August but drought this year caused the crop to mature more quickly and moving up harvest; and drastically cut the amount of U.S. hard red winter wheat that is available to cut.

 

Kansas, the top U.S. winter wheat-producing state, is forecast to produce 291.4 million bushels of winter wheat this year, well below last year's 380 million bushels.

 

 

Minneapolis Grain Exchange

 

MGE July wheat ended up 1/2 cent at US$4.34 1/4 and September settled up 2 1/4 cents at US$4.45 1/4 per bushel.

 

The 9-day relative strength index for MGE September closed at 34, just above the oversold benchmark of 30.

 

Cash U.S. spring wheat basis bids were steady to up 10 cents per bushel Thursday, cash sources said. Thursday's Minneapolis wheat receipts totaled 136 railcars versus last year's 117 railcars. There were 33 durum receipts versus last year's 45 cars.

 

Along with its 2006 U.S. spring wheat plantings estimate, Informa Economics on Thursday forecast 2006 U.S. durum wheat plantings of 2.225 million acres, above the USDA's March estimate of 1.825 million but below last year's 2.76 million acres, brokers noted.