February 7, 2008

 

US Wheat Review on Wednesday: Markets storm limit up, trade new highs

 

 

U.S. wheat futures locked limit up Wednesday, with contracts at all three exchanges trading at record highs as the Minneapolis Grain Exchange held its position as leader of the markets, analysts said.

 

Chicago Board of Trade March wheat finished limit up, or 30 cents higher, at US$10.33 and was synthetically trading around US$10.45 at the close, a trader said. Kansas City Board of Trade March wheat ended up 30 cents at US$10.80 1/4 and was synthetically trading around US$11.00 to US$11.10, a trader said. MGE March wheat settled up 30 cents at US$14.93 and was synthetically trading around US$17.20, a trader said.

 

Contracts at all the exchanges traded at new highs. CBOT May wheat ended limit up, along with the March contract, and set at a record of US$10.49 3/4 at the exchange.

 

MGE spring wheat was the leader amid strong demand for high-protein wheat and a squeeze on short position holders, said Larry Glenn, owner of Glenn Commodities. Despite dramatic recent gains, wheat should remain strong in the near term, Glenn said.

 

"We're just going to keep going," Glenn said. "There are just too many people wanting to buy it - not just Minneapolis but now Kansas City and Chicago. We're not going to stop for awhile."

 

MGE wheat futures are trying to climb high enough to secure acres in the northern Plains for planting this spring, said Tim Hannagan, analyst for Alaron Trading. But corn and soybeans also are competing for the land.

 

"Minneapolis is the rabbit in the race currently," Hannagan said about the wheat markets. "Currently, the Minneapolis spring wheat futures need to get higher. They're still a little too cheap by comparison to the Board of Trade soybean contracts."

 

Egypt's state-owned General Authority for Supply Commodities said it bought 150,000 tonnes of wheat, including 25,000 tonnes of U.S. soft red winter wheat, traded at the CBOT. The rest of the purchase was Russian or Kazakh wheat.

 

The results of an Egyptian tender often attract significant attention in the wheat markets, but the news was overshadowed by the MGE-led rally, Glenn said.

 

"I think it just blended in," he said about the news.

 

Speculative fund interest helped drive the rally in wheat, an analyst said. Commodity funds bought an estimated 3,000 contracts at the CBOT.

 

On Thursday, the U.S. Department of Agriculture is slated to release its weekly export sales report at 8:30 a.m. EST. For the week ended Jan. 31, wheat export sales are expected to be 250,000 tonnes to 600,000 tonnes, analysts said.

 

On Friday, the USDA is due to issue its February supply and demand report at 8:30 a.m. EST. It is expected to show 2007-08 U.S. wheat carryout at 274 million bushels, down from 292 million in January, according to a Dow Jones Newswires survey of 12 analysts.

 

The report also is expected to show an increase in the government's forecast for exports, analysts said. Strong demand for spring wheat should spur the adjustments, they said.

 

Kansas City Board of Trade

 

KCBT wheat futures opened limit up, with the CBOT and MGE. The market felt spillover strength from the MGE rally, a floor trader said. Along with nearby March, KCBT May wheat closed limit up at a record high of US$10.90 1/4.

 

MGE spring wheat futures are the strongest class of wheat, and KCBT hard red winter wheat futures are in second place, Glenn said. Millers are looking to secure some HRW wheat to blend with pricier spring wheat, he said.

 

"It's the next layer down in protein," Glenn said of HRW wheat.

 

Forecast maps for next week feature a significant weather system forming over the southern Rockies, and moving eastward into Texas later in the 10-day period ending Feb. 16, DTN Meteorlogix said. The development brings a decent chance for needed moisture in wheat areas of at least a sector of the southern Plains, the private weather firm said.

 

The best chance for moisture will be in Oklahoma through north-central Texas. However, the dry region from the Texas Panhandle north into southwest Kansas continues to be out of the main moisture track, Meteorlogix said.

 

Minneapolis Grain Exchange

 

MGE March wheat closed at US$14.93, the highest price ever for any wheat contract ever traded on a U.S. exchange, and synthetically traded well above the limit throughout the day session, traders said. MGE May wheat closed limit up at US$13.64 3/4 and was synthetically trading around US$14.20 at the close, a floor trader said.

 

The storyline for MGE wheat is the same as it has been during the market's recent march higher, with strong demand for spring wheat and limited supplies supporting sky-high prices, traders said. The USDA supply/demand report is expected to show a further tightening of high-protein hard red spring wheat stocks, they said.

 

"We're out of wheat and everybody knows it," a MGE floor trader said.

 

The MGE will raise its daily trading limit for spring wheat futures following a flood of sessions in which prices shot to the exchange-imposed limits. The daily trading limit will increase to 40 cents from 30 cents starting with the overnight electronic session that begins on Feb. 11, spokeswoman Nancy Krull said. The CBOT and KCBT also and considering raising their daily trading limits from 30 cents.