June 24, 2006

 

US Wheat Review on Friday: Gives up gains to settle narrowly mixed

 

 

U.S. wheat futures closed narrowly mixed Friday as traders were uncommitted to firm positions ahead of the weekend and prices gave up earlier gains amid uncertainty in the market, traders and analysts said.

 

Basis September contracts, Chicago Board of Trade wheat lost 3/4 cent to US$3.81 1/2, Kansas City Board of Trade firmed 1 cent to US$4.88 1/4 and the Minneapolis Grain Exchange shed 3/4 cent to US$4.61 1/4 a bushel.

 

Profit-taking pressured prices, along with extra volatility in the form of the July options expiration, which added to the "shaky" nature of the trade, a source said. In addition, export demand concerns, weather interruptions to the hard red harvest in Kansas and hot, dry conditions for the northern Plains' hard red spring crop created a mixed tonnee to the session.

 

Trade was thin, however, with funds net sellers of just 300 wheat contracts.

 

Prices were firm for much of the session, but were unable to "generate any follow-through," at session highs, said Shawn McCambridge, senior grains analyst at Calyon Financial in Chicago.

 

Uncertainty over export demand coupled with the weather concerns and the options expiration all weighed on the market, he added.

 

Reports that U.S. exporters stand a better chance to sell wheat to India after extensive negotiations may have encouraged market bulls. However, traders want to see confirmation of business being conducted instead of talk, McCambridge said.

 

U.S. firms placed bids in a 2.2-million-tonne wheat tender for India last week, and at least one of the bidders is selling U.S.-origin, Dow Jones Newswires reported.

 

In other news, the next Kansas Wheat Harvest Report will be issued Monday. The report is produced by the Kansas Wheat Commission and the Kansas Association of Wheat Growers, with aid from the Kansas City Board of Trade and DeBruce Grain.

 

Farmers in Argentina have planted 42% of the 2006-07 wheat crop by Thursday, the Agriculture Secretariat said. Planted area was estimated at 5.598 million hectares, compared to 5.16 million last year, due to higher moisture levels that led to increased plantings in center-west Santa Fe and eastern Cordoba.

 

At the CBOT, Calyon Financial supported the buy side with the purchase of 500 September contracts.

 

Man Financial sold 400 September and 300 December, Fimat sold 200 July 2007 contracts, while J.P. Morgan and O'Connor each sold 100 September.

 

 

KANSAS CITY BOARD OF TRADE

 

KCBT wheat settled firmer, supported in part by concerns over weather-related harvest interruptions in Kansas - the largest hard red winter producer in the U.S. Some areas of the state, however, are beginning to wind down harvest activity.

 

The overall winter wheat harvest is expected to be about 50% complete when the USDA issues its progress report on Monday, and cash movement isn't "what we'd like to see," said Dan Basse, president of AgResource in Chicago.

 

September wheat traded in a 5-cent range for the day. Technical support is placed at US$4.85 1/2 and US$4.80, with the US$4.86-US$4.83 gap area providing additional layers of support. Resistance is met at US$4.91 1/2, US$4.95 and US$5.04 a bushel.

 

Man Financial bought 1,600 September, Prudential Financial bought 500 July, Refco bought a net 300 September and 500 July and Wolcott-Lincoln bought 300 September.

 

ADM sold 800 July and 600 September, UBS sold 400 December, Prudential Financial sold 300 September and Wolcott-Lincoln sold 200 July and 500 December.

 

Refco spread 500 September/July at 8 1/4 cents, while Prudential spread 200 December/July from 14 1/2-15 cents.

 

 

MINNEAPOLIS GRAIN EXCHANGE

 

MGE wheat closed slightly lower after late selling ahead of the weekend pressured the market.

 

Prices earlier had been supported by concerns over the hard red spring crop condition, which the U.S. Department of Agriculture knocked down by 7 percentage points to 60% good to excellent this week. Though recent rains are seen benefiting the crop, forecasts for hot, dry weather going forward during the critical heading development stage are causing concern.

 

The USDA said that 21% of the crop had headed by June 18.

 

"If it gets hot we will have a real problem," a floor broker said. "Right now the damage is relatively limited and the crop outside that area, particularly further west, looks great. But in the affected area it's pretty bad.

 

Temperatures have been on the cool side, which have helped mitigate the worsening crop condition, he added.

 

ADM sold 500 December and 400 September, J.P. Morgan bought 300 July and UBS bought 500 December.

 

The July/September spread traded 500 times between even and 2 cents.