January 3, 2008

 

US Wheat Review on Wednesday: Markets end sharply up as commodities rally

 

 

U.S. wheat futures touched limit up at all three exchanges Wednesday as the markets charged into the new year amid technical buying, spillover support and bullish demand expectations, traders said.

 

Nearby contracts at the Kansas City Board of Trade and Minneapolis Grain Exchange trimmed gains before the close. However, Chicago Board of Trade March wheat finished limit up, 30 cents higher, at US$9.15 per bushel.

 

KCBT March wheat closed up 22 1/2 cents at US$9.36, and MGE March wheat settled 29 1/2 cents higher at US$10.65 3/4.

 

CBOT March and May wheat hit limit up during the day session as part of a broad-based commodities rally, traders said. CBOT soybeans set fresh 34-year highs as corn climbed to prices not seen since 1996, with the gains helping to lift wheat futures, traders said.

 

Firmer energy and metals markets were also seen as supportive, with crude oil hitting US$100 per barrel for the first time ever.

 

"Wheat, I think, was being dragged along by beans," one analyst said. "You've got all these fund managers, index funds touting agricultural commodities. Everybody wants to be a player."

 

Commodity funds bought an estimated 3,000 contracts at the CBOT. In pit trades, Citigroup bought 300 March and JP Morgan sold 500 March.

 

Bullish demand news also boosted wheat futures. State-run Trading Corp. of Pakistan is seeking 610,000 metric tonnes of wheat in two separate tenders; bids for both will be accepted until Jan. 12.

 

The Pakistani tender is "significant" because it involves a sizable amount of wheat, said Louise Gartner, analyst with Spectrum Commodities.

 

In other bullish news, India's federal government lifted its import duty on wheat flour to facilitate easier imports into the country. A senior official said the government might continue its wheat import program and import in small quantities to boost buffer stocks.

 

The official's comments represent the first time a senior official has said India's wheat import program might not end soon after the government scrapped its latest tender because of high prices. Last month, India didn't accept any bids from a tender to import at least 350,000 metric tonnes of wheat.

 

"They've been trying to get some sort of wheat in there but they're just not willing to pay the price," Gartner said of the Indian officials.

 

India said its wheat sowing is progressing well and that the country is on track to reach a government-set production target of more than 75 million metric tonnes in the marketing year that starts April. However, some crop watchers believe dry weather could harm final output.

 

Private meteorological firm T-Storm Weather said in a forecast Wednesday that the main area of concern for wheat in the world is India and Pakistan. Significant rain has been absent there for more than three months, and "we suspect that rain is needed for non-irrigated wheat," T-Storm said.

 

But major rainfall remains unlikely through at least early next week, despite a few showers for Pakistan this weekend, T-Storm said. Temperatures should become slightly warmer than average across India by early next week, according to the weather firm.

 

"It's very, very dry across the entire India wheat belt," Gartner said. "You've got to get some rain there, otherwise you have a problem."

 

 

Kansas City Board of Trade

 

KCBT wheat futures soared, with KCBT March wheat temporarily trading limit up. The market was following strength in CBOT soybeans and wheat, a KCBT floor trader said.

 

There was some technical buying and bullish chatter about Pakistan's tender, the trader said. Bangladesh is also reportedly in the market for 50,000 tonnes, and Egypt's state-owned Food Industries Holding Co. bought 43,500 metric tonnes of Russian wheat in a tender.

 

The U.S. Plains are headed for a warm-up of temperatures this weekend, and a beneficial cover of snow will melt off hard red winter wheat, DTN Meteorlogix said. That will "leave wheat in a more vulnerable situation for damage from any subsequent cold waves going into midwinter," the private weather firm said.

 

 

Minneapolis Grain Exchange

 

MGE wheat largely followed CBOT soybeans and wheat, a floor trader said. Buyers stepped up after recent weakness, and there was an absence of sellers, he said.

 

There are ideas that spring wheat, traded at the MGE, still needs to compete with soybeans and corn for acreage in the U.S. this spring. Traders said they also are eager to see winter wheat planting estimates in the U.S. Department of Agriculture's Jan. 11 crop report.