January 26, 2008

 

US Wheat Review on Friday: Minneapolis Grain Exchange wheat soars limit up on export demand

 

 

U.S. wheat futures soared Friday as strong demand shoved Minneapolis Grain Exchange contracts limit up, traders said.

 

Chicago Board of Trade March wheat closed up 24 cents at US$9.33 per bushel, down 29 1/2 cents on the week. Kansas City Board of Trade March wheat ended up 15 cents at US$9.70, down 41 1/4 cents on the week. Minneapolis Grain Exchange March wheat closed limit up, 30 cents higher, at US$12.67, up 72 1/4 cents on the week.

 

MGE wheat futures hit surged limit up early in the trading session and remained there throughout the day. CBOT and KCBT wheat futures felt some spillover support from the MGE and from CBOT corn and soybeans, traders said.

 

Weekly export sales for the week ended Jan. 17 were also supportive, traders said. Total weekly U.S. export sales, including old-crop and new-crop wheat, were 669,500 metric tonnes, above trade expectations of 300,000 to 600,000 tonnes.

 

Net sales of 422,700 tonnes of old crop wheat were 4% above the previous week and 67% above the prior four-week average, according to the U.S. Department of Agriculture. Thirty-three weeks into the marketing year, export sales are 95% of the USDA's target for the year.

 

Looking ahead, CBOT wheat futures are facing some downside potential next week, said Joe Victor, vice president of marketing for commodity research firm Allendale Inc.

 

"Over the past 10 years, odds have been 60% that wheat will finish lower by next Friday versus this Friday," Victor said.

 

There are some bearish expectations that Argentina will reopen its wheat export registry, which has been closed to new commitments since early December. The president of the Argentine wheat growers association on Thursday told Dow Jones Newswires the registry would likely reopen soon for a limited amount of grain.

 

 

Kansas City Board of Trade

 

KCBT wheat futures rose on spillover support from neighboring markets and solid demand, a KCBT floor trader said. The gains at MGE were supportive as well as a late comeback in CBOT corn and soybeans, he said.

 

Commodities markets also are still paying attention to outside equity markets, the KCBT trader said. It seems as though fears of a recession are easing, which is allowing grains to advance, he said.

 

There are some bullish concerns about possible winterkill rattling around in the market, a trader said. But this weekend should bring a warmer trend to the U.S. Plains and the Midwest, according to DTN Meteorlogix.

 

The regions, however, will not see a sustained period of warmth, Meteorlogix said. A polar high pressure system will redevelop in Canada and move south into the Plains and Midwest next week, the private weather firm said.

 

 

Minneapolis Grain Exchange

 

MGE March wheat closed limit up at US$12.67, matching the all-time high the contract set in overnight electronic trading. That is the highest price ever for a wheat contract at a U.S. exchange.

 

MGE March wheat was synthetically trading about 18 cents higher at the close, a floor trader said. During the day, the contract traded as much as 30 cents higher and there were offers at 40 cents higher, he said. MGE May and July wheat also closed limit up.

 

Support stemmed from strong weekly export sales of hard red spring wheat, traded at the MGE, floor traders said. The market also had bullish momentum after trading limit up in the nearby contract overnight, they said.

 

"It's looking like this thing is going to stay hot for awhile," a MGE floor trader said. "It's a lot of the Asian buyers, especially Japan, buying spring wheat. The stocks are just dwindling quickly. Mills needs this too."

 

Weekly export sales announced Friday pushed total HRS wheat sales for the year above 277 million bushels, topping the USDA's target of 275 million, said Brian Henry, broker for Archer Financial Services. HRS wheat is used to make bread.

 

"Both the pace of shipments and obviously the price of the crop have been keeping up" with strong sales, Henry said. "We're probably not going to see a lot of cancellations in terms of prior sales."