January 12, 2008

 

US Wheat Review on Friday: Surge higher; limit up on acreage data

 

 

U.S. wheat futures ended sharply higher Friday, with most futures ending limit up, following the release of bullish acreage data from the U.S. Department of Agriculture.

 

March CBOT wheat ended 26 3/4 cents higher at US$9.0 1/4, March KCBT wheat settled 30 cents higher at US$9.24, and March MGE wheat finished 30 cents higher at US$10.62 3/4.

 

"The good, strong planting numbers from the USDA caught the attention of the market, and with technical strength and an overall bullish attitude in commodities in general attracted speculative buying to send prices soaring to their upper daily trading limits," said Shawn McCambridge, senior gains analyst with Prudential Bache Commodities in Chicago.

 

Kansas City new crop contracts were the leader of the complex, with new crop futures pulling on old crop contracts, traders said. The market was also buoyed by the buy-anything mentality seen across agricultural commodities throughout the day, traders added.

 

The smaller winter wheat seedings report raised awareness in the market, as the lower acres tightened the ability of the winter wheat crop to absorb any weather threat, McCambridge added.

 

The market effectively added risk premium to prices, as the new wrinkle of smaller acreage raised attention for supply side issues for new crop contracts, a trader said. Meanwhile, old crop futures continued to garner strength from a tight balance sheet, as traders remained concerned about potential demand and dwindling inventories, he added.

 

CBOT traders said July wheat was synthetically trading 20 to 22 cents a bushel higher in the options pit.

 

USDA, in its January crop report, put 2008-09 all winter wheat seedings at 46.610 million acres, well below the average analyst estimate of 48.657 million. In 2007, seedings were 44.987 million. The USDA pegged HRW wheat seedings at 32.5 million, down from 32.94 million in 2007. Traders expected to see an increase in plantings, with the average analyst estimate at 34.883 million, according to a pre-report survey by Dow Jones Newswires.

 

The DTN Meteorlogix Weather forecast said continued dry conditions, and colder weather, will cover the central U.S. during next week. At this time, temperatures are not expected to be cold enough to cause damage to the Plains wheat crop. However, the situation will bear close watching, due to indications of a significant amount of wheat acreage having been seeded very late and not having developed good winter hardiness, Meteorlogix added.

 

In CBOT pit trades, speculative fund buying was estimated at 7,000 contracts.

 

 

KANSAS CITY BOARD OF TRADE

 

KCBT wheat futures ended sharply higher locked at its upper trading limits. Most of the session's activity was in options, with traders saying the new crop July futures was trading 30 cents above limit-up levels synthetically. Light spread activity was reported, but once the July futures locked limit up, the spreading was eliminated, a KCBT floor broker said.

 

 

MINNEAPOLIS GRAIN EXCHANGE

 

MGE wheat futures ended limit up as well, with traders saying the market was a follower of KCBT wheat on the release of smaller-than-expected winter wheat acreage. Once the deferred month contracts follow Kansas City limit up, the front months climbed in unison, a MGE trader said. The trader said the March and September contracts were trading synthetically 10 and 25 cents higher in options.