February 5, 2008
US Wheat Review on Monday: Markets rise limit; Minneapolis Grain Exchange March ends at record
U.S. wheat futures Monday closed limit up at all three exchanges, with the nearby Minneapolis Grain Exchange contract settling at a record high as sellers stayed on the sidelines, analysts said.
Chicago Board of Trade March wheat soared limit up, 30 cents higher, to US$9.73 per bushel. Kansas City Board of Trade March wheat jumped 30 cents to US$10.20 1/4, and Minneapolis Grain Exchange March wheat climbed 30 cents to US$14.33.
CBOT March wheat hit the daily, exchange-imposed limit heading into the close after the front-month contracts at the KCBT and MGE had already slammed into the 30-cent ceiling. The markets were feeding off each other, with strong gains in CBOT corn, soybeans and crude oil adding to the bullish tonnee, a CBOT floor analyst said.
U.S. wheat futures have rallied hard in recent weeks, with MGE March wheat leading the upside amid strong demand for spring wheat and fears about dwindling supplies. Demand for spring wheat remains strong, and CBOT and KCBT wheat continued to climb on borrowed strength from the MGE, a trader said.
Sellers stayed on the sidelines as the mentality in the markets is that prices will continue to rise, said Shawn McCambridge, analyst with Prudential Bache in Chicago.
"Until we show clearly that demand is being rationed or starting to slow down considerably, it's going to be hard to push this thing lower," McCambridge said.
Bullish market sentiments seem to be encouraging outside fund money to flow in, an analyst said. Commodity funds bought an estimated 2,000 contracts at the CBOT.
There was little fresh news out for wheat during the session or the weekend. Traders are waiting for the U.S. Department of Agriculture to release its February supply/demand report Friday morning.
The report will include fresh estimates on 2007-08 wheat ending stocks and on U.S. wheat exports. Several analysts expect to see stocks drop and exports increase.
The USDA said weekly U.S. wheat export inspections were 16.552 million bushels, below trade estimates of 18 million to 27 million. For the marketing year to date, 886.024 million bushels have been inspected for export, up from 580.225 million at the same time last year, according to the USDA.
Kansas City Board of Trade
KCBT March wheat closed limit up and was synthetically trading about 4 cents higher at the close, a floor trader said. KCBT May wheat also ended limit up.
The market continued to feel borrowed strength from the MGE, the KCBT trader said. Spillover from the MGE was based on strong demand for spring wheat and shrinking supplies, he said.
"Everything you said about Minneapolis last week, go back, copy and paste," the trader said.
A jet stream track this week should work quickly across the Southern Plains and keep the region generally dry, with no appreciable moisture relief for a "very stressed" winter wheat crop, DTN Meteorlogix said in a forecast. USDA National Agricultural Statistics Service offices in some winter wheat states are expected to release crop reports about 4 p.m. EST Monday afternoon. The reports "are expected to show further declines in crop ratings from western Kansas through the Oklahoma and Texas Panhandle areas," Meteorlogix said.
Minneapolis Grain Exchange
MGE March wheat closed limit up at a record high of US$14.33, a price first hit in the overnight electronic trading session. The contract was synthetically trading about 30 to 40 cents higher at the close, a MGE floor trader said.
MGE May wheat also closed limit up. However, it was "not a very firm lock," the MGE trader said.
Strong demand and tight supplies continued to propel the market, an analyst said. The USDA is expected to cut its hard red spring wheat carryout estimate in the supply/demand report due out Friday, analysts said.
A battle for acreage in the U.S. Northern Plains among spring wheat, corn and soybeans also remains supportive, an analyst said. The crops all want to expand plantings to loosen ending stocks.
