October 26, 2005


US Wheat Review on Tuesday: Ends up on technicals; iraq eyed



U.S. wheat futures settled firm Tuesday on technical buying after this week's one-month lows, with Kansas City hard red winter wheat futures leading on hopes for U.S. wheat sales to Iraq, brokers said.


The U.S. Department of Agriculture's report that 57% of the U.S. winter wheat crop was in good-to-excellent condition as of Sunday, behind last year's 76%, was construed as supportive by some traders, but others noted the crop was not even fully planted (86% as of Sunday).


"Even if the crop was in poor condition ... spring conditions can really determine what production potential could be," said Shawn McCambridge, a grain analyst at Prudential Financial.


CBOT December soft red winter wheat closed up 2 1/4 cents at US$3.25 1/2 after setting a one-month low overnight of US$3.22 1/4. CBOT March wheat ended up 1 3/4 cents at US$3.40 1/4.


Commodity funds bought at least 2,000 lots after entering Tuesday's open- outcry session net short about 16,600 CBOT wheat futures, brokers said.


Fimat USA bought 2,000 December, Rand Financial bought 1,200 December, and Deutsche Bank and Cargill Investor Services each bought 1,000 December. Refco Inc. and R.J. O'Brien each sold 1,000 December.


Spot U.S. soft red winter wheat cash basis bids were steady to firm Tuesday while spot midday CIF basis bids steady to up 1 cent, cash sources said.


Overnight U.S. wheat export sales business was slow, while traders hoped for news about the much-awaited sale of 1 million metric tonnes of U.S. wheat to Iraq, a sale that has been rumored for more than a week.


In global wheat news, Japan said it would seek 85,000 metric tonnes of wheat, including 65,000 tonnes of U.S. wheat, in a tender Thursday; and Hungary will export 120,000 tonnes of wheat to drought-stricken Portugal in November, Hungarian newspapers said.


Traders also eyed early harvest reports and harvest weather in key exporters Argentina and Australia; aggressive global marketing of both wheat crops is expected to pick up early next year, challenging U.S. wheat sales.



Kansas City Board of Trade


KCBT December wheat ended Tuesday up 5 cents at US$3.70 1/4, above its 50-day moving day average of US$3.64 1/2 after setting a 3 1/2-week low Monday of US$3.63 1/2; and March closed up 5 1/4 cents at US$3.76 3/4.


Cargill Inc. bought 500 December and sold 300 March, Frontier bought 110 December and 300 March, ADM Investor Services sold 400 December, Fimat sold 150 December and bought 200 March, Man Financial sold 250 December and 300 March, Refco Inc. bought 150 July and sold 350 December and UBS bought 200 December and 200 March, brokers said.


In spread trade, UBS and Fimat each spread 300 December/March; while Fimat also spread 900 March/December and 5-3/4 to 6 cents, they said. UBS spread 200 March/May and 100 March/July.


In related news, the KCBT said a new annual trading volume record had been set as of last Friday in hard red winter wheat futures. Commodity funds have amassed a hefty net long position in KCBT HRW wheat and shorted lower protein CBOT SRW wheat futures.


Cash spot U.S. HRW wheat basis bids were steady to firm Tuesday with an 11-cent gain in St. Louis; while spot midday CIF basis bids were unchanged, they noted.



Minneapolis Grain Exchange


MGE December wheat settled Tuesday up 2 3/4 cents at US$3.69 1/4 after setting Monday a one-month low of US$3.65, and March closed up 2 3/4 cents at US$3.76.


"Trade was really slow, and we didn't do a very good job of following the Kansas City (wheat) rally," one MGE wheat broker said.


ADM Investor Services sold about 500 December, Country Hedging was a light seller and local traders were noted buyers, the broker said.


Cash U.S. spot spring wheat basis bids were steady to firm Tuesday, with a 3-cent gain in Grand Forks, N.D., grain sources said.