January 19, 2011

CBOT wheat rise as hostile weather threatens supplies

US wheat futures increased the most in six weeks on indication that demand is increasing as supplies in China, Australia and US are jeopardized because of hostile weather.

Turkey bought 145,000 tonnes of US wheat, the USDA said today. Conditions in Kansas, the largest winter-wheat state, ranged from abnormally dry to severe drought, data from the University of Nebraska at Lincoln show. In China, about four million hectares of crops have had up to 90% less rain than last year. Floods in Australia have delayed shipments and cut quality.

"There's still some concern about the poor condition of the winter-wheat crop in the US and the quality of Australia's crop," said Frank Cholly Sr, a senior market strategist at Lind-Waldock in Chicago. Dry weather in China is "absolutely a concern," he said.

Wheat futures for March delivery rose 20 cents, or 2.6%, to settle at US$7.9325 a bushel at 1:15 pm on the Chicago Board of Trade, capping the biggest gain since December 3. Earlier, the price touched US$7.9575, the highest for a most- active contract since January 6. Futures have jumped 56% in the past year.

Turkey's purchase was bigger than the combined total of US shipments to the nation in the past three marketing years, USDA data show.

Japan is seeking to buy 149,114 tonnes of milling wheat from the US and Canada, the most in six weeks, in a regular tender on January 20, the country's agriculture ministry said today.

Parts of western Kansas and eastern Colorado got as much as 0.2 inch (0.5 centimetre) of moisture last weekend, and additional storms may drop 0.25 inch in the next week, according to World Weather Inc. The precipitation "should help ease dryness, but a more generalized rain event of greater significance will still be needed," the forecaster said.

In China, winter-crop areas in the Yellow River Basin will be dry for the next two weeks, World Weather said.

Wheat is the fourth-biggest US crop, valued at US$10.6 billion in 2009, behind corn, soy, government data show.