February 14, 2008

 

US Wheat Review on Wednesday: Mostly lower in setback; Minneapolis Grain Exchange March soars

 

 

Most U.S. wheat futures closed weaker Wednesday as the markets pulled back further from record high prices, analysts said.

 

However, Minneapolis Grain Exchange March wheat continued to be a glaring exception to the trend. The contract surged the exchange's new daily limit of 90 cents and closed at a fresh all-time high.

 

Chicago Board of Trade March wheat fell 15 1/2 cents to US$9.91 1/2 per bushel. Kansas City Board of Trade March wheat slipped 4 1/2 cents to US$10.41, and MGE March wheat surged 90 cents to US$17.63.

 

CBOT and KCBT wheat appear to have peaked following a run-up to record highs, said Brian Hoops, president of Midwest Market Solutions. On Monday, CBOT March wheat hit a high of US$11.53 and KCBT March wheat hit a high of US$12.00 1/2.

 

"We opened limit higher on Monday and those were our highs and will continue to be our highs," Hoops said.

 

There was little fresh supportive news out for the wheat markets during the day session, traders said. India won't have to import wheat at least until July because the government has adequate stocks, the country's commerce secretary said.

 

A decision on whether India needs to import wheat will be taken only after assessing actual production in 2008-09 and government procurement volumes, the secretary said. India contracted to import around 1.8 million tonnes of wheat in 2007 to shore up its buffer stocks.

 

After the close, Egypt's state-owned General Authority for Supply Commodities said it is tendering to buy at least 55,000 to 60,000 metric tonnes of wheat for shipment from March 15 to March 31, on a free-on-board basis. GASC on Tuesday canceled a tender for wheat in what was seen by some traders as a bearish sign that Egypt, considered a savvy wheat buyer on the world market, expected prices to drop.

 

 

Kansas City Board of Trade

 

KCBT March wheat felt some spillover support from limit-up MGE March wheat during the session but closed lower. Price swings did not approach new 90-cent trading limits.

 

The daily trading limits for KCBT and MGE wheat futures rose to 90 cents from 60 cents Wednesday, while the daily trading limit at the CBOT remains 60 cents. KCBT and MGE 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.

 

In the southwestern Plains winter wheat areas, rain fell Tuesday through southeast Texas, east and south of the main wheat belt, DTN Meteorlogix said. Temperatures averaged near to below normal.

 

Central and east Texas wheat areas may benefit from moderate precipitation during Friday into Saturday, but the heaviest activity appears to set up farther east and south of previous forecast model indications, Meteorlogix said. Moisture is not expected to reach the dry areas of the northern Texas Panhandle or southwest Kansas, the private weather firm said.

 

 

Minneapolis Grain Exchange

 

MGE March wheat a new high of US$17.63, an increase of 70% since the beginning of the year. It did not appear the contract traded synthetically higher in options, a MGE floor trader said.

 

Strong demand for high-protein spring wheat, traded at the MGE, and short supplies continue to support MGE March wheat, Hoops said.

 

"There are no deliverable stocks and people just can't get their hands on that wheat," he said.

 

Japan said Tuesday it was seeking 190,000 metric tonnes of wheat, including 77,000 tonnes of U.S. dark northern spring wheat, in a tender to be concluded Thursday. The shipment is expected to arrive in May and June.

 

"I don't expect them to slow down at all," a MGE floor trader said about Japan's purchases. "Their demand is very inelastic."

 

The MGE is set to remove price limits on the spot month contract starting Feb. 25. The rally in MGE March wheat should subside by then, Hoops said.

 

"We're in the last week or so" of the MGE March rally, Hoops said. "But it's just anybody's guess how high this will go."

 

Although MGE March wheat ended limit up, it has seen a "significant break" when you look at synthetic prices, a MGE floor trader said. The contract at one point synthetically traded US$22, he said.