February 9, 2008

 

US Wheat Review on Friday: Limit up again, closes at record highs

 

 

U.S. wheat futures closed limit up and at record highs again Friday amid continued upside leadership from the Minneapolis Grain Exchange, analysts said.

 

Chicago Board of Trade March wheat closed limit up, 30 cents higher, at US$10.93 per bushel. At the close, the contract was synthetically trading around US$11.65, a trader said.

 

Kansas City Board of Trade March wheat ended up 30 cents at US$11.40 1/4 and was synthetically trading between US$12.10 and US$12.70, a trader said. MGE March wheat settled up 30 cents at US$15.53 and was synthetically trading between US$20 and US$21 at the close, a trader said.

 

The MGE held its spot as leader of the rally in wheat amid strong demand for high-protein spring wheat and tight supplies. Holders of short positions also are having a hard time getting out of the market, analysts said.

 

At the CBOT, the May and July contracts also ended limit up, with July wheat setting an all-time high for the exchange of US$11.09 3/4 and synthetically trading around US$11.60 at the close, a trader said. The KCBT and MGE also had contracts settle at all-time highs.

 

"We're sort of like Star-Trekking here, going where we've never gone before," said Sid Love, analyst at Kropf & Love Consulting.

 

Heading into next week, the CBOT will continue to take its cue from activity at the MGE, traders said. The CBOT, KCBT and MGE will raise their daily trading limits to 40 cents from 30 cents starting with Monday's evening session.

 

The CME Group Inc. (CME) also is raising its minimum margins for CBOT wheat and mini wheat futures by 50%, the exchange said. The changes are effective at the close of business Friday, the exchange said.

 

In other news, the U.S. Department of Agriculture in its monthly supply and demand report, released Friday, lowered its forecast for 2007-08 wheat ending stocks and raised its projection for exports. The adjustments were expected and confirmed supply tightness, traders said.

 

The USDA pegged wheat carryout at 272 million bushels, down from 292 million last month and below the average of analysts' pre-report estimates of 274 million. The USDA in the report increased its export forecast by 25 million bushels.

 

The new USDA forecasts were "pretty much in line with what the trade was looking at," Love said.

 

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

 

Kansas City Board of Trade

 

KCBT wheat ended limit up in the first six contract months as surging prices at the MGE pulled the market higher, a floor trader said. KCBT March wheat closed limit up and was synthetically trading 70 cents to US$1.30 higher.

 

The USDA's February supply/demand report was unsurprising, so the market continued to focus on the MGE-led rally, traders said. At the KCBT, the report didn't attract much attention, "not with all the other issues going on in wheat now," a floor trader said.

 

Minneapolis Grain Exchange

 

MGE wheat ended limit up in the first eight contract months. MGE May wheat ended 30 cents higher at US$14.24 3/4 and was synthetically trading between US$16.60 and US$17, a floor trader said.

 

In its supply and demand report, the USDA cut its estimate for hard spring wheat ending stocks to 73 million bushels from 88 million last month. Exports of hard spring wheat were pegged at 295 million, up from 275 million in January.

 

Along with increasing its daily trading limit to 40 cents, the MGE asked the Commodity Futures Trading Commission whether it can remove price limits on the spot Hard Red Spring Wheat futures contract month, starting with the first business day after expiration of non-serial options on the spot month. If approved, the lifting of limits will be effective Feb. 25, starting with the evening session Feb. 24.