February 8, 2008

 

US Wheat Review on Thursday: Climbs limit up again, trades at highs

 

 

Nearby U.S. wheat futures closed limit up Thursday after all three exchanges saw contracts trade at record highs amid continued leadership from the Minneapolis Grain Exchange, traders said.

 

Chicago Board of Trade March wheat closed limit up, 30 cents higher, at US$10.63 and was synthetically trading at US$10.80, a floor trader said. Kansas City Board of Trade March wheat finished up 30 cents at US$11.10 1/4 and was synthetically trading between US$11.45 and US$11.60, a trader said. MGE March wheat ended up 30 cents at US$15.23 and was synthetically trading between US$18.00 and US$18.50, a trader said.

 

CBOT March and May wheat felt spillover support from surging prices at the MGE, but deferred CBOT contracts pulled back amid some profit-taking and bull spreading, traders said. CBOT May wheat ended limit up at an all-time high of US$10.79 3/4.

 

The nearby MGE contract has been leading the upswing in wheat recently amid solid demand for spring wheat and fears about short supplies. Shorts in the front month also are having a hard time getting out of the market, analysts said.

 

Total weekly U.S. wheat export sales for the week ended Jan. 31 were 468,200 tonnes, within trade estimates of 250,000 tonnes to 600,000 tonnes. New sales for wheat for delivery in 2007-08 were 413,500 tonnes but cancellations/buybacks were 100,700 tonnes, leaving old-crop sales at about 312,900 tonnes, the USDA said in a breakdown of the business.

 

Thirty-five weeks into the marketing year, old-crop export sales are already 97% of the USDA's target for the year. The USDA is slated to release updated supply/demand figures at 8:30 a.m. EST Friday, and analysts expect to see a decline in U.S. wheat carryout and an increase in the export projection.

 

In other news, Brazil suspended its wheat import tax until June 30, the Foreign Trade Ministry said. The temporary measure is good for one million metric tonnes of wheat.

 

But high U.S. wheat prices will inhibit any rush by Brazilian wheat millers, brokers and market analysts said. Brokers said they have not heard of any immediate purchases of North American wheat following Wednesday's decision to allow it into Brazil duty-free.

 

Commodity funds bought an estimated 2,000 contracts at the CBOT.

 

Kansas City Board of Trade

 

KCBT March and May wheat traded above US$11. KCBT May wheat reached a high of US$11.20 1/4.

 

KCBT wheat futures rose amid spillover support from the rally at the MGE and an interest in hard red winter wheat as a potential substitute for HRS wheat, analysts said. The March contract was synthetically trading 30 cents to 50 cents over the limit at the close, a KCBT floor trader said.

 

Traders are waiting for the USDA's supply/demand report to come out but no major surprises are expected, a KCBT floor trader said. The market knows supplies are tight and getting tighter, he said.

 

Minneapolis Grain Exchange

 

MGE March wheat traded above the landmark level of US$15 per bushel, matching a high of US$15.23 first set in overnight trading. That is the highest price for any U.S. wheat future ever traded on a U.S. exchange.

 

Nearby and deferred month contracts ended sharply higher or limit up. MGE May wheat closed limit up and was synthetically trading around US$15.00 to US$15.30, a floor trader said.

 

Demand for spring wheat remains solid. Japan's Agriculture Ministry said it purchased 127,000 tonnes of wheat, including 51,000 tonnes of U.S. dark northern spring wheat and 30,000 tonnes of U.S. hard red winter wheat, in a regular tender, according to a media report.

 

The wheat is for loading in either April or May, the report said. However, the purchase fell short of Japan's plan to buy 172,000 tonnes, and there was chatter in the market that Japan may not have been able to get its hands on all the wheat it wanted, traders said.