July 17, 2007

 

US Wheat Review on Monday: Tumbles on limit-down CBOT corn, soybeans

 

 

U.S. wheat futures dropped sharply Monday on spillover pressure from limit-down moves in the neighboring corn and soybean markets, traders said.

 

Chicago Board of Trade September wheat ended 19 cents lower at US$6.01 3/4 per bushel, CBOT December wheat slid 17 1/4 cents to US$6.18.

 

Kansas City Board of Trade September wheat closed 15 1/4 cents lower at US$5.93 3/4, and KCBT December wheat finished 18 1/4 cents lower at US$6.09. Minneapolis Grain Exchange September wheat settled down 16 3/4 cents at US$6.13 1/4, and MGE December wheat ended down 14 cents at US$6.25 1/4.

 

CBOT corn and soybean contracts finished stuck at limit-down, or 20 cents and 50 cents lower respectively, on forecasts for wetter-than-expected weather in Midwestern growing areas, traders said. Spillover pressure from the neighboring markets triggered sell stops in wheat, which drove prices deep into negative territory, they said.

 

Commodity funds sold an estimated 3,000 contracts at the CBOT. In pit trades, Man Financial sold 700 December.

 

Still, the outlook for wheat is positive amid tight world stocks and production threats in key producing areas, including Argentina, said Jerry Gidel, analyst with North America Risk Management Services in Chicago. There are also bullish expectations that the U.S. Department of Agriculture will cut its good-to-excellent ratings for spring wheat in its weekly crop progress report, traders said.

 

For most-active CBOT September wheat, US$5.94 is a key level of support, Gidel said.

 

"As long as we kind of stay above that scenario, I think we're still going to be dealing with the potentially smaller supplies and the spring wheat issues and the world production numbers," Gidel said.

 

CBOT September wheat traded to a session high of US$6.14 1/2 and a session low of US$6, which is "a big psychology number," Gidel said.

 

Since the end of June, the leading wheat contract has been consolidating in the US$6.50-US$5.74 range, at the top of a three-month uptrend, a market technician said. But current trading near US$6.02 per bushel means the contract has begun to break down below US$6.08 resistance, he said. Trading below US$5.74 would confirm a breakdown and point the lead contract down to US$5.52 resistance initially, or perhaps down to US$5.32 1/2, the technician said.

 

Weekly U.S. wheat export inspections were on the low end of trade expectations but didn't have much of an impact of trading, a CBOT floor trader said. The USDA reported inspections for the week ended July 12 totaled 13.818 million bushels, while analysts' estimates ranged from 12-18 million. For the marketing year to date, 94.419 million bushels have been inspected for export, up from 90.875 million at the same time last year, according to the USDA.

 

 

Kansas City Board of Trade

 

Concerns about dryness slowing Argentina's wheat plantings helped underpin wheat futures, a KCBT floor broker said. Cropcast reported Friday that Argentina's primary growing areas had seen "extremely dry" conditions during the previous 60 days, with many spots picking up less than 20% of normal rainfall.

 

Looking ahead, U.S. weather forecasts should determine the market's direction on Tuesday, the broker said. Further heavy losses for CBOT corn and soybeans could weigh on wheat, although a damaging heat wave in spring wheat areas of the North Plains could offer support, he said.

 

 

Minneapolis Grain Exchange

 

An intense heat wave will likely develop throughout U.S. spring wheat areas in the Northern Plains late this week, forecasters said. Highs should exceed 100 degrees Fahrenheit across far western areas of South Dakota and into eastern Montana, according to an updated forecast from T-Storm Weather. Temperatures in the mid-90s are seen elsewhere across the Dakotas and through western Nebraska, T-Storm said.

 

"We're going to see lots of 100s coming up and (it'll be) dry," said Charlie Notis, meteorologist with Freese-Notis Weather. "The brunt of the heat is going to be later this week, through next week. That's going to be for all of the spring wheat areas, including Minnesota."

 

The USDA is expected to cut good-to-excellent condition ratings for spring wheat by 1-4 percentage points in its weekly crop progress report, due out at 4 p.m. EDT (2000 GMT), traders and analysts said. As of July 8, 78% of the crop was rated in good-to-excellent condition.