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------------------------------------------------------- Wheat Snaps Higher On Bullish Estimates 57 hours, 15 minutes ago
DOW JONES NEWSWIRES
U.S. wheat futures rose Friday on bullish estimates for the 2006-07 winter wheat crop that induced large amounts of speculative buying.
Kansas City Board of Trade July wheat led the way, gaining 17 1/2 cents to $4.56 a bushel, Chicago Board of Trade July added 9 3/4 cents to $3.72 1/4 and Minneapolis Grain Exchange July gained 11 1/2 cents to $4.33 1/2.
The 2006 Kansas Hard Red Winter Wheat Tour, sponsored by the Wheat Quality Council, on Thursday estimated the state's crop at 319.2 million bushels, versus production of 380 million bushels last year. While the trade had anticipated low numbers due to adverse weather this season, the projection was beneath most trade estimates.
Informa Analytics on Friday followed that up with a forecast reportedly pegging the entire U.S. winter wheat crop at 1.3 billion bushels, compared to 1.5 billion last year. It estimated the U.S. hard red winter wheat crop at 690 million bushels, versus 930 million last year.
The HRW crop has been hurt by dry winter and spring weather, and later by freeze damage. Drought in Texas and Oklahoma has severely impacted those crops.
In fact, weather conditions have been so poor this year that, with the recent low crop projections, wheat abandonment this year could rise to 1.6 million to 1.7 million acres, compared to abandonment in a normal year of just 500,000 acres, said Bill Nelson, commodity analyst and associate vice president at A.G. Edwards in St. Louis.
In some areas the wheat crop is beyond help and recent rains may simply encourage farmers to rip out the wheat and plant another crop such as sorghum, said Nelson.
The new crop projections present a unique supply/demand situation in which the market is using 900 million to 950 million bushels of HRW wheat a year, mainly for making bread, and is set to produce roughly 200 million to 250 million bushels less.
With HRW ending stocks at 173 million bushels, "you're basically talking about having supplies for the next crop year that are no bigger and maybe even smaller than typical demand," Nelson said.
The USDA will issue its first estimate of the 2006-07 wheat crop on Friday, May 12.
U.S. dollar weakness and expectations for export business to Iraq were also supportive features. Iraq is expected to tender for wheat next week on the world market, though officials at the Grain Board there aren't specifying an amount.
Iraq needs about 3 million metric tons a year to meet its food needs.
India is also in the market for up to an additional 2 million metric tons this year, on top of 3.5 million tons that have already been slated to import. Much of that wheat is expected to be sourced through Australia.
CBOT July wheat hit a 2 1/2-week high of $3.78, before profit-taking whittled some of it away and settled at $3.72 1/4.
In Chicago, the day was ruled by speculative and fund buying, which totaled 10,000 contracts as of 1330 EDT.
Rand Financial bought a net 2,500 July, Goldenberg Hehmeyer bought 1,500 July, Iowa Grain bought 1,500 December and J.P. Morgan bought a net 800 July. Fimat bought a net 500 July, while Citigroup Global Markets, Calyon Financial and Man Financial each bought 500 July. R.J. O'Brien bought a net 400 July.
Rosenthal Collins sold 1,000 July and O'Connor sold 400 July. Other sellers were light and scattered.
KCBT July jumped to a 2 1/2-week high of $4.59 a bushel on the bullish crop news and settled just beneath that level at $4.56.
"Clearly the market took the Informa numbers as something friendly and rallied the market higher. On Monday, we'll take a better look at the weather and we'll get a better handle on the Kansas crop," a broker said.
The market was overdone to the upside and prices are expected to set back on Monday, he added.
Prudential Financial bought 1,500 July, Man Financial bought 900 July, ABN Amro bought 800 July and Fimat bought 700 July. On the sell side, FCStone sold 400 July, Fimat sold 300 July, Man Financial sold 600 July and Prudential Financial sold 900 July.
MGE wheat futures climbed along with the gains at the KCBT and CBOT, with the July contract rising to 2 1/2-week highs.
Most-active July rose to $4.49, the highest price since April 12, and settled just beneath that level at $4.48 1/4.
Weather has been a bit on the soggy side in North Dakota, which has slowed spring wheat plantings from their early torrid pace. Still, plantings are in line with the five-year average and are not expected to pose a problem, a trader said.
Friday's gains were simply a function of trying to keep pace with the advance in Kansas City, he added.
-By Tom Sellen, Dow Jones Newswires; 913-322-5177;
