January 30, 2008

 

US Wheat Review on Tuesday: Mostly down amid profit-taking; Minneapolis Grain Exchange soars

 

 

Profit-taking and bearish export news from Argentina drove U.S. wheat futures mostly lower Tuesday, although the nearby Minneapolis Grain Exchange contract was a dramatic exception, traders and analysts said.

 

Minneapolis Grain Exchange March wheat finished limit up, or 30 cents higher, at a record price amid ongoing bullishness about strong demand for spring wheat and tight supplies.

 

Chicago Board of Trade March wheat fell 19 cents to US$9.44 per bushel. Kansas City Board of Trade March wheat closed 9 3/4 cents lower at US$9.90 1/4, and MGE March wheat surged 30 cents to US$13.27, tying the record high set in overnight electronic trading.

 

CBOT March wheat touched limit up in early activity amid spillover support from sharp gains at the MGE, traders said. CBOT and KCBT wheat were able to break after MGE showed some weakness, with March temporarily coming off its limit up level, said Dale Durchholz, analyst for AgriVisor.

 

"Anybody that played the long side over the past couple of days is just like, 'I'm out of here,'" Durchholz said.

 

Commodity funds sold an estimated 2,000 contracts at the CBOT. In CBOT pit trades, JP Morgan sold 500 December.

 

Word that Argentina was reopening it wheat export registry also weighed on the markets, analysts said. New Argentine wheat exports will be limited to 2 million metric tonnes and be spread over the next five months, with a maximum of 400,000 tonnes shipped per month, the Agriculture Secretariat said.

 

The 2 million tonnes of wheat freed up for export was higher than the amount expected by analysts. The government was expected to clear about 1.5 million metric tonnes of wheat for export, the president of the Argentine wheat growers association said last week.

 

CBOT floor traders in recent sessions had talked about the potential for the registry to reopen, and the news was no big surprise, traders said. Still, "the fact that it did happen probably gave the market a reason to break," said Tom Leffler, owner of Leffler Commodities.

 

"I think Kansas City and Chicago saw most of their downside off the news out of Argentina that they'll reopen their wheat export registry," he said.

 

In other export news, Brazil's National Foreign Trade Council planned to meet to discuss the possible removal of a 10% wheat import tax. The tax is charged to nations outside of the Southern Cone Common Market, or Mercosur. If the tax is removed or reduced, even temporarily, it makes it cost effective for some areas in Brazil to import wheat from North America.

 

 

Kansas City Board of Trade

 

KCBT March wheat hit limit up early in the session on borrowed strength from the MGE. The market pulled back amid long liquidation and confirmation that Argentina will return as a competitor on the world market, a KCBT floor trader said. Aside from the rally at the MGE, KCBT and CBOT wheat didn't really have a reason to be higher, he said.

 

Moving forward, MGE wheat "ought to find a break in here somewhere," Leffler said. When that happens, weakness at the MGE will likely drag down KCBT and CBOT wheat, the trader said.

 

 

Minneapolis Grain Exchange

 

MGE March wheat, locked at limit up, was synthetically trading 35 cents higher at the close, two MGE floor traders said. Deferred months felt pressure from some bull spreading, one trader said. The other trader said September and December contracts were "just selling off in a natural correction."

 

MGE March wheat first hit US$13.27, a new all-time high, in overnight electronic trading and matched it during the day session. It's the first wheat contract to ever trade above the landmark price of US$13 at any U.S. exchange.

 

Solid demand for spring wheat, traded at the MGE, and fears about shrinking supplies have prodded bulls to push the nearby contract limit-up in the past four day sessions, traders said. The MGE doesn't have rules that allow for the daily trading limit to be expanded or suspended following several days of limit-up moves, an exchange spokeswoman said.

 

In other news, the Canadian Wheat Board said the successful conclusion of free-trade negotiations between Canada and Peru was welcome news for Western Canadian farmers who export more than CUS$100 million worth of wheat and barley to Peru each year. A new agreement between the countries would give Canada duty-free access to Peru's market and to a growing economy with increasing demand for high-quality wheat products and beer, the CWB said in a release.