November 30, 2005


US Wheat Review on Tuesday: Ends higher; kansas city board of trade leads on funds, exports



U.S. wheat futures closed higher Tuesday, with Kansas City Board of Trade hard red winter wheat futures contracts setting new highs late on technical fund buying after recent long liquidation, news that Iraq tendered for shipping in December on 250,000 tonnes of U.S. wheat and hopes for the sale of 200,000 additional tonnes to Iraq near-term, brokers said.


"It was the logical time for hard red wheat to reassert its dominance - the day before first notice day and after we've shaken out a large fund long position," one wheat broker said.


"You don't really need extra HRW export sales at this point. You simply need to ship what we've sold to keep the balance sheet tight," he added. "The Iraqi shipping tender eased some of those shipping concerns."


The KCBT/CBOT March wheat spread ended at 46 3/4 cents per bushel, premium KCBT, after ending Monday at 40 1/2 cents, premium KCBT. The spread hit a high Nov. 10 of 49 3/4 cents as global demand for higher-protein U.S. wheat outpaces that for lower protein U.S. SRW wheat.


CBOT December wheat ended Tuesday up 3 cents at US$3.00 1/2; and March settled up 3 1/2 cents at US$3.16 3/4.


Commodity funds bought about 3,400 contracts, after entering the session net short about 54,000 lots, brokers said.


ABN Amro and Man Financial each bought about 1,000 March while Iowa Grain bought 2,500 December early. Fimat sold 1,000 December 2006 lots.


Some CBOT traders expected up to 4,000 delivery notices to be posted on Wednesday's first notice day against CBOT December wheat due to the buildup of deliverable supplies and poor export demand.


However, others noted that the spread (March/December) had moved to nearly full carry late Tuesday, leaving little need to post deliveries to widen the spread.


Moreover, CBOT wheat registrations late Monday totaled 1,972 lots, meaning that many more registrations must be filed by 4 p.m. CST Tuesday in order to see the heavy deliveries.


"At a certain point it's hard to estimate first-day deliveries because you don't know what positions companies have on that they want to deliver or not deliver against," one broker said.


Cash spot U.S. SRW wheat basis bids were steady to firm Tuesday, with most spot bids rolled to the March contract; spot midday Gulf SRW wheat basis bids up 1 cent per bushel, grain sources said.


Overnight U.S. wheat export sales were quiet.


In global wheat news, the Australian Bureau of Agricultural & Resource Economics forecast the 2005-06 Australian wheat crop Tuesday at 24.1 million metric tonnes, up 18% from actual output of 20.4 million tonnes last crop year ended March 31.


The forecast is also sharply above the September projection of 19.7 million tonnes, largely reflecting the impact of good spring rains and mild temperatures.


Still, wheat brokers noted Argentina this week lowered its wheat crop forecast to 11.1 million tonnes, below the USDA's last estimate of 12.1 million.


"The Australian and Argentine news cancel each other out," one broker said.


In other news, China's eastern Shandong province plans to auction 75,000 metric tonnes of local wheat reserves Wednesday; and Russia bought 46,710 metric tonnes of domestic milling grain at the intervention trading session held Tuesday in Moscow, including 43,200 tonnes of third-grade soft milling wheat, 2,700 tonnes of fourth-grade wheat, sources said.



Kansas City Board of Trade


KCBT December gapped open higher and settled Tuesday up 11 3/4 cents at US$3.59 1/4 per bushel; and March wheat gapped open and closed up 8 3/4 cents at US$3.63 1/2.


Both KCBT December and March contracts ended Tuesday above their 200-day moving averages and just below their key 100-day moving averages.


"A close above the 100-day moving average could bring additional technical buying later this week," one broker said.


Term Commodities sold 200 December and 300 March; Man Financial bought 800 March, 300 July and 200 September while selling 200 December and 200 May; Prudential Financial sold 400 March and bought 100 July; Refco Inc. bought 150 December, 100 March, 100 May and sold 150 July; and Shay Trading sold 250 March, brokers said.


In spread trade, ADM spread 1,000 December/March while Fimat spread 1,200 December/March, they noted. Refco Inc. spread 500 March/December and Man Financial spread 400 March/May.


Traders said Tuesday's strong rally in December suggested few deliveries would be posted on Wednesday's first notice day after earlier estimates of moderate deliveries.


"If they (deliveries) exceed 1,500 (lots Wednesday), then look for bear spreads to be back in play," one broker said.


Deferred KCBT wheat contracts found support Tuesday from the U.S. Department of Agriculture's report Monday that 52% of the winter wheat crop was in good-to-excellent condition, down 3 percentage points from the previous week.


Most of the crop deterioration was found in southern hard red winter wheat-growing states, particularly in Oklahoma and Texas.


In Oklahoma, 41% of the crop was in good-to-excellent condition, behind last week's rating of 46%; and in Texas, 17% of the winter wheat crop was in good-to-excellent condition, down from last week's rating of 27%.


Cash spot U.S. HRW cash basis bids were also steady to firm; spot midday U.S. Gulf HRW basis bids were not available while January and February bids rose 2 cents, sources said.



Minneapolis Grain Exchange


MGE December wheat ended Tuesday up 2 1/2 cents at US$3.64 1/2; and MGE March closed up 6 1/2 cent at US$3.72 1/4.


Both MGE December and March contracts ended Tuesday above their key 100- and 200-day moving averages.


Cash U.S. spring wheat basis bids were steady to 10 cents lower Tuesday, cash sources said. Minneapolis wheat rail receipts totaled 127 cars versus 157 cars last year.


Modest deliveries were expected against MGE December on Wednesday's first notice day after deliverable stocks rose to 15.7 million bushels as of Friday versus 14.6 million bushels the previous week and 15.4 million last year.