February 2, 2008

 

US Wheat Review on Friday: Minneapolis grain exchange leads rally, closes at record high

 

 

U.S. wheat futures closed sharply higher Friday amid spillover support from limit-up gains and historically high prices at the Minneapolis Grain Exchange, traders said.

 

The nearby MGE March contract became the first wheat contract to ever trade above US$14 per bushel at a U.S. exchange. It first traded above the landmark level during the overnight trading session and matched the record price during the day session.

 

Chicago Board of Trade March wheat finished 13 1/2 cents higher at US$9.43 per bushel, up 10 cents on the week. Kansas City Board of Trade March wheat rallied 23 cents to US$9.90 1/4, up 20 1/4 cents on the week. MGE March wheat ended limit up, or 30 cents higher, at US$14.03, up US$1.36 on the week.

 

CBOT and KCBT wheat climbed on borrowed strength from the strong rally at the MGE, traders said. MGE March wheat opened limit up and remained there throughout the day session. MGE May and July wheat also settled limit up.

 

"There's a ripple effect there," said Alan Brugler, president of Brugler Marketing & Management, about the spillover support from the MGE to the CBOT and KCBT.

 

Commodity funds bought an estimated 2,000 contracts at the CBOT. In CBOT pit trades, Tenco bought 300 July and MF Global bought 200 March. RJ O'Brien sold 200 March.

 

In a potentially bearish development, Ukraine may raise its grain export quota for the current season to 2.9 million metric tonnes from 1.2 million, according to a report. The country's agriculture minister said the government had received requests for 2.9 million tonnes of grain and would consider satisfying all of them, the report said.

 

Argentina earlier this week reopened its wheat export registry. New wheat exports will be limited to 2 million metric tonnes and spread over the next five months, with a maximum of 400,000 tonnes shipped per month, the Agriculture Secretariat said.

 

 

Kansas City Board of Trade

 

KCBT March wheat briefly touched limit up on spillover strength from the MGE before trimming gains, traders said. There is talk that millers are chasing higher-protein HRW wheat, traded at the KCBT, as an alternative to hard red spring wheat, traded at the MGE, Brugler said.

 

"In Kansas City, you're seeing everybody push the protein bids because they're trying to get some of the higher protein hard red because they're having trouble getting a hold of some of that spring wheat," Brugler said.

 

Looking at the weather, the general weather trend of the next week to 10 days will bring a fast-moving storm system across the main U.S. crop areas, DTN Meteorlogix said in a forecast. In the southern Plains, a generally dry outlook will maintain concerns about low moisture availability to winter wheat, the private weather firm said.

 

 

Minneapolis Grain Exchange

 

MGE March wheat settled limit up and was synthetically trading another 30 cents higher at the close, a MGE floor trader said. MGE wheat futures continue to feel support from commercial demand for spring wheat and fears about tight supplies, traders said.

 

Japan said overnight it bought 41,000 tonnes of U.S. dark northern spring wheat in a routine weekly tender for loading in April, according to a media report. Japan is buying some of its wheat earlier than usual to ensure it has enough supply, the report said.

 

"There's still demand for high-protein wheat and there's just enough to be had," a MGE trader said.

 

March/May spreading also remained a feature of the market, traders said. MGE May and July wheat closed limit up along with the nearby March contract.

 

MGE September wheat, which represents the new crop, temporarily traded limit up during the day session. The new crop continues to feel support from a battle for acreage in the U.S. northern Plains among spring wheat, corn and soybeans, analysts said.