November 10, 2005


US Wheat Review on Wednesday: Higher; kansas city board of trade up on Specs, export hopes



U.S. wheat futures settled higher Wednesday, led by gains in Kansas City Board of Trade hard red winter wheat futures on speculative buying and hopes for near-term U.S. export sales, brokers said.


In particular, rumors circulated about potential U.S. wheat sales to Iraq or Australian wheat sales to India, where domestic prices reportedly fell overnight on rumors of possible imports. The latter would take supplies off the global market.


Some traders suggested the early KCBT buying was speculative, as funds hold a powerful long position and Tuesday's turnaround remained inexplicable.


Others noted Wednesday's gains could precede a possible cut Thursday by the U.S. Department of Agriculture in its 2005-06 U.S. HRW end stocks and boost in its HRW export estimates.


Midday U.S. Gulf HRW basis bids were steady, while soft white wheat bids edged up in the Pacific Northwest, suggesting possible business. Still, Japan has said it will tender for 145,000 tonnes of U.S. wheat Thursday and the Philippines has shown interest.


KCBT December wheat ended Wednesday up 6 cents at US$3.70 3/4; technical buy stops were triggered above US$3.68, the 50-day moving average, brokers said. March closed up 4 1/4 cents at US$3.75.


One technical trader noted unusual strength in the bellwether KCBT/CBOT December wheat spread, a trade that has been popular since this summer due to good U.S. HRW export sales and lackluster U.S. SRW sales.


"The spread made a very shallow correction recently," the trader said. "It seems like it wants to make a new high, with 61 1/2 cents a near-term target and 75-80 cents a longer-term target."


The KCBT/CBOT December spread closed Wednesday at 55 3/4, not far from its recent high of 58 1/4 cents.


ADM Investor Services bought 800 KCBT December, 100 March and 200 July, Cargill Investor Services bought 300 December and 200 July while selling 350 March, Man Financial traded 400 December and bought 600 March and Prudential Financial bought 200 March and sold 200 December.


Spread trade was less active than it has been in recent sessions. Shay Grain bought 250 December/March, Fimat sold 400 March/December and Man Financial sold 600 March/December. Frontier Trading spread 350 May/March, brokers noted.


Deferred KCBT contracts found lingering support from Monday's USDA report that the U.S. winter wheat crop was only 57% in good-to-excellent condition, a drop from 61% in that shape last week. Moreover, forecasts called for dry conditions through Friday across the U.S. HRW belt.



Chicago Board of Trade


CBOT December wheat futures settled Wednesday up 2 cents at US$3.15, while CBOT March wheat ended up 2 cents at US$3.31 1/4.


Commodity funds were light net buyers, led by Man Financial's purchase of 1,000 December. UBS bought March and December while O'Connor sold 500 March, Calyon Financial sold 500 December and Prudential Financial sold 400 March.


Spreading was less active than has been seen recently, with O'Connor spreading 600 December/March and 600 March/May early; and Fimat spreading March/December late.


Cash spot U.S. SRW wheat basis bids were steady to firm, with a 10-cent gain in Louisville, Ky.; while spot midday CIF SRW wheat basis bids were steady, they noted.


Overnight U.S. export sales were quiet.


Only light positioning was seen before Thursday's scheduled U.S. Department of Agriculture crop supply/demand report.


Analysts forecast the government would report Thursday 2005-06 U.S. wheat ending stocks at 533 million bushels, up slightly from last month's 530 million bushels.


In global news, Canadian feed wheat prices have found modest support ahead of an expected decision in December on whether tariffs could be placed on U.S. corn amid "dumping" charges. The 2005 wheat harvest is now virtually finished across western Canada.


In other global news, the U.K. said this year's wheat quality was better than last year's while France's state grains board cut its forecast for French soft wheat exports within the E.U. in the 2005-06 marketing year to 8.65 million metric tonnes from last month's 8.75 million.


Traders continued to keep an eye on harvest and weather reports from key exporters Argentina and Australia. Lingering dry weather was of concern in the former, while scaled-back forecasts for rain in eastern Australia for the next two weeks boded well for harvest there.



Minneapolis Grain Exchange


MGE December spring wheat settled Wednesday up 4 cents at US$3.76, and March closed up 4 1/4 cents at US$3.82 1/4 following gains in KCBT HRW wheat, brokers said.


Country Hedging and UBS Warburg were light buyers while ADM Investor Services sold about 150 December, brokers said.


Cash spot U.S. spring wheat basis bids were steady to weak, with a 5-cent loss in spot Minneapolis rail bids, grain merchandisers said.