Spring wheat futures at the Minneapolis Grain Exchange ended firm on Thursday but KCBT/MGE spreading amid an apparent vomitoxin issue with this year's US spring wheat crop limited gains, traders said.
"I wouldn't be surprised to see some people trying to switch away from the Minneapolis market while maybe the discounts or premiums still pencil out especially someone who had sold a little higher quality specs and are now concerned about whether or not they can meet them," said Shawn McCambridge, analyst for Prudential Securities.
MGE wheat closed unchanged to 3-1/4 cents per bushel higher. September was up 3-1/4 at $3.39-1/2 per bushel. There are mounting concerns about quality problems in spring wheat due to vomitoxin, a by-product of a fungal disease. The wheat containing vomitoxin can be delivered on MGE futures contracts, a scenario that is expected to pressure the new-crop MGE September contract and lend support to the two other wheat futures exchanges, especially KCBT. "Certainly that's affecting their September/December spread there's a lot of talk there is some high vomitoxin wheat being shipped into Duluth for the purpose of delivery so there's no question that they found a lot of vomitoxin," said Charlie Sernatinger, analyst for Chicago trade house O'Connor and Co Pit sources said a strong number for wheat in USA's weekly export sales report was giving wheat futures a bit of a lift.
USDA on Thursday said a net 620,800 tonnes (old-crop) of US wheat were sold for export last week. That's above trade estimates for 350,000 to 500,000 tonnes. The export data included a sale of 55,000 tonnes to Iraq, USDA said. Export activity overnight-included South Korea's purchase of 52,500 tonnes of optional-origin feed wheat.
Japan bought 100,000 tonnes of wheat overnight on Wednesday, with 60,000 tonnes coming from the United States. Traders said much of Thursday's activity was position squaring before USA's August crop production and supply/demand reports.
The USDA data will be released at 7:30 am CDT (1230 GMT) on Friday and an average of analysts' estimates pegged 2005 US wheat production at 2.178 billion bushels, down from the government's forecast in July for 2.208 billion. The decline was largely due to an expected drop in spring wheat production.
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