January 4, 2008

 

US Wheat Review on Thursday: Rallies limit up on speculative buys, tightness

 

 

U.S. wheat futures finished limit up in contracts at all three exchanges Thursday as the markets rallied for a second day amid speculative buying and concerns about global tightness, analysts said.

 

Chicago Board of Trade March wheat settled limit up, 30 cents higher, at US$9.45 per bushel. Activity in CBOT wheat options at the close indicated the March futures contract would start the overnight electronic session near unchanged, a floor trader said.

 

Kansas City Board of Trade March wheat ended up 29 1/2 cents at US$9.65 1/2, and Minneapolis Grain Exchange March wheat finished 30 cents higher at US$10.95 3/4.

 

Wheat prices soared as speculative money continued to flow into commodities, traders said. At the CBOT, commodity funds bought an estimated 4,000 wheat contracts, along with 4,000 corn contracts and 3,000 soybean contracts.

 

Wheat felt a boost from strength in the neighboring and outside markets, with CBOT July soybeans setting a new all-time high of US$12.93 on the screen, exceeding the previous record of US$12.90. Crude oil, meanwhile, hit US$100 per barrel for the second time in as many days.

 

There are also renewed concerns about historically tight global supplies and expectations for strong demand, analysts said. The U.S. Department of Agriculture is slated to update its projections for U.S. and world ending stocks and issue its first estimate on 2008-09 winter wheat plantings on Jan. 11.

 

"With the stocks situation where it's at, it doesn't take much to light a fire under" the wheat markets, said Jason Britt, broker and analyst at Central State Commodities.

 

CBOT May wheat also closed limit up, rising to US$9.52 1/2.

 

The markets continued to get support from a Pakistani tender for 610,000 metric tonnes of wheat, traders said. It is also bullish that an Indian official said this week that the government might continue its wheat import program to boost buffer stocks, they said.

 

In other bullish news, China this week started export quotas on some grain flour made from wheat. The move is intended to stabilize domestic grain prices and guarantee grain security after a recent surge in international prices.

 

A USDA attache report posted last week said the Chinese government also was removing the export rebate on grains and flour products to help stabilize domestic prices.

 

The strength in wheat futures demonstrates "how inelastic demand is," said Greg Wagner, director of marketing and risk assessment for Horizon Ag Strategies.

 

"That's really what the story is now," Wagner said.

 

 

Kansas City Board of Trade

 

KCBT May wheat was the first contract to hit limit up Thursday and finished 30 cents higher at US$9.62. Volume was relatively thin, which allowed speculative buying to shove prices sharply higher, a KCBT floor trader said.

 

There was some market chatter about a media report that Iraq intends to buy 4.5 million tonnes of wheat in 2008, up from 2.5 million tonnes delivered in 2007, a trader said. Private importers would apparently be allowed to import the wheat, which would make business more efficient, he said.

 

The DTN Meteorlogix forecast calls for dry conditions with warmer temperatures moving into the weekend. Snow cover in Plains hard red winter wheat areas will melt off, leaving plants vulnerable to subsequent cold waves, the weather firm said.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures were considered to be a follower of the CBOT as that is the market the funds focus on, an MGE floor trader said. There was not much fresh news out and it seemed as though price began taking off when crude oil breached US$100 per barrel, he said.

 

Traders are waiting for the USDA to release weekly export data at 8:30 a.m. EST Thursday. Analysts predict wheat export sales will range from 200,000 to 550,000 tonnes.