January 18, 2008

 

US Wheat Review on Thursday: Climbs on momentum, egypt, supply fears

 

 

Bullish momentum and supply fears shoved U.S. wheat futures sharply higher Thursday, with the nearby Minneapolis Grain Exchange contract reaching another new record high, traders said.

 

Contracts at all three U.S. exchanges touched limit up, 30 cents higher, during the day session, although Chicago Board of Trade and Kansas City Board of Trade wheat pulled back on profit-taking before the close.

 

CBOT March wheat finished 14 cents higher at US$9.40 1/2 per bushel. KBCT March wheat rose 22 1/2 cents to US$9.81 1/2, and MGE March wheat closed up 30 cents at US$11.64 3/4.

 

U.S. wheat surged on the opening on follow-through buying and demand news as MGE wheat led KCBT and CBOT contracts to the upside, traders said. CBOT March, May and July wheat temporarily traded limit up during the day session.

 

There was support for the rally from news that Egypt's General Authority for Supply Commodities had bought 490,000 metric tonnes of wheat, including 180,000 tonnes of U.S. soft red winter wheat, said Larry Glenn, owner of Glenn Commodities. Weekly U.S. wheat export sales are were "solid," he said.

 

The U.S. Department of Agriculture said export sales for the week ended Jan. 10 were 493,800 tonnes of wheat, including 404,800 tonnes of old crop wheat and 89,000 tonnes of new crop wheat. That was at the high end of trade estimates, which ranged from 300,000 tonnes to 550,000 tonnes.

 

Export sales as of Jan. 10, 32 weeks into the marketing year, are 94% of the USDA's target for the year. Total commitments are up 68% from last year, while outstanding sales are up 78% from a year ago, according to the USDA.

 

"That spurt of demand news that we actually got it done to Egypt kind of brought memories back to traders about what we used to do when demand showed up," Glenn said, referring to demand-inspired rallies last summer. "It put some optimism back in the market."

 

There also was lingering support from the USDA's seeding estimates, released Friday, that sowed hard red winter wheat acres are down from last year, traders said. Total wheat seedings also below expectations, crushing analysts' ideas that farmers had significantly expanded plantings after prices hit new all-time highs in 2007.

 

The wheat markets want to buy more acres for spring wheat, which is traded at the MGE, an analyst said. Spring wheat must competing for land in the Northern Plains with corn and soybeans.

 

Profit-taking trimmed gains at the CBOT and KCBT going into the close, but the wheat markets should see some carryover strength Friday, Glenn said.

 

"I think we'll have some more strength with it in there," he said about the wheat markets. "Tomorrow we'll see some follow-through with it."

 

 

Kansas City Board of Trade

 

Nearby and deferred KCBT wheat futures rallied limit up in early activity on borrowed strength from the MGE-led rally, traders said. Bullishness about tight supplies and demand also supported gains, they said.

 

Cropcast Agricultural Weather said frigid temperatures Thursday morning likely caused "patchy" winterkill in hard red winter wheat areas of the U.S. Plains. Lows were below zero degrees Fahrenheit in most of the Nebraska Panhandle and northeastern Colorado, the private weather firm said.

 

However, Drew Lyon, a dryland crops specialist at the University of Nebraska-Lincoln's Panhandle Research and Extension Center, said it's unlikely there was any serious damage to the dormant crop.

 

"We got down in the single, minus digits, but a lot of (the wheat) has snow cover," Lyon said. "That which doesn't have snow cover is probably hardened off. It's really not trying to grow, so the sugars in the leaves are high and that acts kind of like an anti-freeze."

 

Glenn agreed that winterkill worries were premature.

 

"It's too early to yell wolf," Glenn said.

 

Moving forward, most of the winterkill threats during the next week will lay in the east-central Midwest on Sunday morning, when sub-zero temperatures could threaten portions of the soft wheat belt in central Illinois, central Indiana and possibly western Ohio, Cropcast said.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures led the CBOT and KCBT higher on bullish momentum, and stayed locked limit up during the day session. Few sellers are willing to jump in front of the market, a floor trader said.

 

Nearby MGE March wheat for the second consecutive day surged to a record high. The new high of US$11.64 3/4 bushel topped the previous high of US$11.60, set overnight. That is the highest price ever for wheat at any U.S. exchange.

 

Cash demand is strong for high-protein wheat, and the market is still trying to secure spring wheat acres, the trader said. Japan overnight said it bought 150,000 metric tonnes of wheat, including 105,000 tonnes from the U.S., in a routine tender. The shipment is expected to arrive March 6 to April 30.