January 23, 2008

 

US Wheat Review on Tuesday: Ends sharply mixed; Minneapolis Grain Exchange hits record high

 

 

U.S. wheat futures closed sharply mixed Tuesday, with the nearby Minneapolis Grain Exchange contract surging to a new all-time high above US$12 per bushel.

 

Chicago Board of Trade March wheat fell 28 1/2 cents to US$9.34 per bushel. Kansas City Board of Trade March wheat tumbled 26 1/2 cents to US$9.84 3/4, and MGE March wheat jumped 24 1/4 cents to US$12.19.

 

It was a volatile trading session for wheat futures, as the markets slumped at the opening of trading on spillover pressure from a sell-off in global equities. MGE wheat climbed into positive territory and lent spillover support to the CBOT and KCBT, traders said.

 

There also was support from some early bargain buying and from news that the Federal Reserve cut its overnight lending rate by 75 basis points, a cash-connected CBOT floor trader said. However, CBOT and KCBT wheat futures fell back into negative territory amid late profit-taking, he said.

 

The choppy activity reflected uncertainty among traders about how to approach the wheat markets amid turmoil in outside markets, said Shawn McCambridge, analyst for Prudential Bache.

 

"I just don't think that for the winter wheat markets in particular that you have a firm feel on where you want to be at the end of the day," McCambridge said. "Right now there are a lot of concerns on the projected economic turmoil that's out there and how it relates to our markets."

 

The wheat markets still have underlying support from strong demand, traders and analysts said. Iraq, for one, issued a tender to buy at least 50,000 metric tonnes of hard wheat.

 

State-run Trading Corporation of Pakistan, meanwhile, finalized the purchase of 510,000 tonnes of milling wheat at US$467 a tonne, basis cost and freight, in a tender that closed last week, a government official said. The grain was from a range of origins, including the U.S., Australia and Russia, the official said. The company also accepted a bid for 100,000 tonnes of white wheat, but the price was not yet finalized, he said.

 

"We still have fundamental support in this market," McCambridge said. "There's still demand out there."

 

There was a sharp disparity at the close between prices for CBOT July wheat in open auction and electronic trading. The contract, which represents the new crop, was 12 1/4 cents ip in open auction trading and down 11 1/4 cents on the screen. UBS was seen to be a buyer of about 500 July contracts at the close, a trader said.

 

Moving forward, trading will likely remain choppy until more stability returns to the outside markets, traders and analysts said.

 

 

Kansas City Board of Trade

 

KCBT wheat futures rose earlier in the day session, "mainly from spillover from Minneapolis," said Tom Leffler, owner of Leffler Commodities. Weakness later in the session came amid profit-taking and the pullback at the CBOT, a trader said.

 

The Iraqi tender and Pakistan purchase are supportive because they show there is still demand in the world that "is going to pull stocks down," Leffler said.

 

 

Minneapolis Grain Exchange

 

MGE March wheat reached a new high of US$12.24 3/4 per bushel, exceeding the previous high of 11.94 3/4 set Friday. That represents the highest price for any contract ever traded at a U.S. exchange and the first time a contract has traded above US$12.

 

MGE March wheat has set new all-time highs for four consecutive day session. The market has bullish momentum and support from solid demand, an analyst said.

 

The market also is trying to secure acres for spring wheat, traded at the MGE, analysts said. Spring wheat is locked in a battle for land with corn and soybeans.

 

"Minneapolis has the support of good demand and tight supplies," McCambridge said. "Their new crops supplies are much father away than the winter wheat."