February 1, 2008

 

US Wheat Review on Thursday: Minneapolis Grain Exchange March hits limit up, new record high

 

 

U.S. wheat futures ended mostly firmer Thursday, with the nearby Minneapolis Grain Exchange contract bolting to a new all-time high amid solid demand and bull spreading, traders said.

 

Chicago Board of Trade March wheat closed 7 cents higher at US$9.29 1/2 per bushel. Kansas City Board of Trade March wheat rose 1/4 cent to US$9.67 1/4, and MGE March wheat surged limit up, 30 cents higher, to US$13.73.

 

CBOT wheat futures broke early in a low-volume trade amid spillover pressure from early losses at the MGE, traders said. But the market bounced back later in the session and felt some borrowed strength from the rally in nearby MGE March wheat, they said.

 

MGE March wheat has traded limit up, or 30 cents higher, in several recent sessions and led CBOT and KCBT wheat higher on the upswing. That trend continued Thursday after the markets recovered from their early weakness, a trader said.

 

Demand for spring wheat, traded at the MGE, remains strong, and supplies are dwindling, analysts said.

 

"We're in a tight enough situation that anytime you break down like this it seems like all of a sudden you see some export demand," said Jason Britt, broker and analyst for Central State Commodities.

 

Weekly U.S. wheat export sales also were seen as supportive by some traders. Total export sales for the week ended Jan. 24, including old crop and new crop business, were 588,800 metric tonnes, according to the U.S. Department of Agriculture. Analysts had predicted sales of 300,000 to 700,000 tonnes.

 

Thirty-four weeks into the 2007-08 marketing year, total commitments are now 96% of the USDA's target for the year. Commitments are up 66% from a year ago, and outstanding sales are up 86%, the USDA said.

 

"I view sales as bullish," one CBOT floor trader said. "Some people are shrugging it off, but that's a lot of wheat leaving the country."

 

The Federal Reserve's decision Wednesday to lower its key lending rate by one-half percentage point also was supportive for commodities, Britt said. The move by the Fed capped an unprecedented eight-day period in which officials slashed rates by 125 basis points to ward off recession risks.

 

"That is bullish for commodities markets because that is negative for the dollar," Britt said. "It is a longer-term bullish factor for the corn, beans and wheat all the way across."

 

 

Kansas City Board of Trade

 

KCBT wheat futures rose amid spillover strength from nearby MGE wheat, floor traders said. However, light end-of-the-month positioning kept a lid of the KCBT March contract, they said.

 

KCBT March wheat ended only slightly higher as 300 March wheat contracts were sold on the close, one KCBT trader said. There also were 300 July wheat contracts bought on the close, although it was not a spread, he said.

 

A mix of winter weather moving through the central and southeast Plains was seen as beneficial for hard red winter wheat, DTN Meteorlogix said in a forecast. Still, the outlook is "difficult" for soil moisture in wheat areas of the western Plains, the private weather firm said.

 

The chronically dry extent of the western Plains from North Dakota to Texas will continue in a worrisome trend, Meteorlogix said. Farmers from the Texas Panhandle north to North Dakota are worried about a lack of soil moisture ahead of spring, the firm said.

 

 

Minneapolis Grain Exchange

 

In a rebound from sharp early losses, MGE March wheat surged to a new all-time high of US$13.73, exceeding the previous high of US$13.55. The contract closed limit up and was synthetically trading 15 to 30 cents higher at the close, a MGE floor trader said.

 

Active bull spreading supported March wheat, along with strong commercial demand for spring wheat and concerns about tight supplies, another MGE floor trader said. Despite rallying hard during the past two weeks, March wheat "shows no sign of weakness whatsoever," he said.

 

Hard red spring export sales for the week ended Jan. 24 were 5 million bushels, and total HRS wheat sales are at 282 million bushels versus the USDA forecast of 275 million, said Bill Nelson, associate vice president of AG Edwards & Sons. The news is supportive for old crop Minneapolis futures, he said in a note to clients.

 

"The truth of it is we're still in a tight enough situation that it doesn't take much to spark a little enthusiasm," Britt said.

 

MGE May wheat temporarily traded limit down, 30 cents lower, but ended 24 1/2 cents higher at US$12.44 3/4. The July, September and December contracts closed sharply lower on spreading after each touched limit down earlier in the session.