February 13, 2008

 

US Wheat Review on Tuesday: Tumbles, except for limit-up Minneapolis Grain Exchange March

 

 

Most U.S. wheat futures closed sharply lower Tuesday in a correction from recent rallies, with several contracts ending limit down.

 

Minneapolis Grain Exhcange March wheat was the exception. The contract settled limit up, 60 cents higher, on steady demand for high-protein spring wheat and tight supplies.

 

Chicago Board of Trade March wheat tumbled 41 cents at US$10.07 per bushel. Kansas City Board of Trade March wheat dropped 38 1/4 cents to US$10.45 1/2, and MGE March wheat surged 60 cents to US$16.73.

 

The wheat markets have room to pull back after a recent record-breaking run-up, analysts said. CBOT May wheat ended limit down, 60 cents lower, at US$10.25 and was synthetically trading around six cents lower at the close, a floor trader said.

 

"Today was just liquidation," said Dale Durchholz, analyst with AgriVisor.

 

Egypt's state-owned General Authority for Supply Commodities said it cancelled a tender to buy at least 55,000 to 60,000 metric tonnes of wheat for shipment from March 11 to March 31, on a free-on-board basis. The tender was issued after the end of the day session Monday.

 

The cancelled tender may have been seen as negative by some traders, Durchholz said. GASC may have been thinking that prices would weaken further after the U.S. wheat exchanges increased daily price limits, he said.

 

The CBOT, KCBT and MGE increased the daily trading limit to 60 cents from 30 cents during the weekend following a series of limit-up moves the previous week.

 

"I think even the shifts the exchanges made in the rules for the three different wheat contracts may have impacted Egypt's overnight wheat tender and made them say, 'We're not going to chase this thing,'" Durchholz said.

 

Daily trading limits at the exchanges will increase to 90 cents from 60 cents if two or more contracts within a crop year end at limit bid or offer. At least two new-crop CBOT wheat contracts settled limit down, but the limit will not be raised because they were not "locked" limit down, exchange officials said.

 

 

Kansas City Board of Trade

 

The daily trading limits for KCBT and MGE wheat futures Wednesday will increase to 90 cents from 60 cents, exchange officials said. Daily price limits will revert back to 60 cents after no wheat futures contract month closes limit bid or limit offer for three consecutive business days, according to the exchanges.

 

"It will be 90 cents tomorrow," KCBT spokeswoman Shelia Summers said.

 

KCBT wheat futures slumped as the market corrected from high prices, traders said. KCBT March wheat at the opening felt spillover support from limit-up MGE March wheat but could not hold its early gains.

 

In other news, dry and windy conditions continued to affect Texas' winter wheat last week, the state's National Agricultural Statistics Service office said in a new crop condition report. As of Feb. 10, 9% of the crop was rated good to excellent, 31% was fair and 60% was poor to very poor. That is near unchanged from the previous week, when 10% was seen as good to excellent, 29% was fair and 61% was poor to very poor.

 

"Winter wheat continued to struggle across most of the state due to lack of moisture," the NASS report said. "Wheat condition was poor to fair statewide."

 

 

Minneapolis Grain Exchange

 

The daily trading limit for MGE wheat futures will increase to 90 cents from 60 cents Wednesday, the exchange said.

 

MGE March wheat ended limit up, 60 cents higher, on strong demand for high-protein spring wheat, traded at the MGE, and short supplies. Japan said overnight it was seeking 190,000 metric tonnes of wheat, including 77,000 tonnes of U.S. dark northern spring wheat.

 

MGE March wheat briefly traded off limit during the day session but returned to the exchange-imposed ceiling by the close of trading. The contract was not synthetically trading higher at the close, a MGE floor trader said.

 

Deferred contracts at the MGE were sharply lower. MGE July, September, December, March 2009, May 2009 and July 2009 wheat ended limit down, 60 cents lower.