February 15, 2008
US Wheat Review on Thursday: Surges on demand, rebound, Minneapolis Grain Exchange rally
U.S. wheat futures closed sharply higher Thursday amid a pickup in world demand news and with continued leadership from limit-up moves at the Minneapolis Grain Exchange, traders said.
Nearby MGE March wheat surged limit up, 90 cents higher, to a new all-time high, and the MGE May contract also ended limit up. As a result, the Minneapolis exchange will increase its daily trading limit by 50% Friday.
Chicago Board of Trade March futures were up 40 1/2 cents at US$10.32 per bushel. Kansas City Board of Trade March wheat closed up 53 cents at US$10.94, and MGE March wheat closed up 90 cents at US$18.53.
The biggest factor for CBOT and KCBT wheat was the limit-up gains at the MGE, said Tom Leffler, owner of Leffler Commodities. The MGE rally provided spillover support, and there also was technical buying at the other exchanges after pullbacks earlier in the week, he said.
Fundamentally, there was a burst of new demand news that was seen as supportive to U.S. wheat, traders said. Egypt's state-owned General Authority for Supply Commodities, or GASC, said Thursday it bought 235,000 metric tonnes of wheat, including 115,000 tonnes of U.S. soft red winter wheat. SRW wheat is traded at the CBOT.
As part of the purchase, GASC also bought 120,000 tonnes of Kazakh wheat. The grain is for shipment on a free on board basis from March 15-31.
The purchases came after GASC canceled a tender Tuesday. Officials did not offer a reason for the earlier cancellation, but traders said that it was because Egypt thought it could get a better price.
"We did sell some wheat to Egypt" on Thursday, Leffler said. "That was nice for a change."
The state-run Grain Board of Iraq, meanwhile, issued a new tender to buy at least 50,000 metric tonnes of wheat, the third such tender this year, according to its Web site. The board set the closing date for the new tender at 0900 GMT on Feb. 23.
Tunisia also bought 42,000 metric tonnes of optional-origin wheat in a spot tender Thursday, European traders said.
Kansas City Board of Trade
KCBT wheat futures got support from the MGE rally and the pickup in international wheat business, a floor trader said. The demand news more than offset disappointing weekly export data, he said.
Total weekly U.S. wheat export sales for the week ended Feb. 7 were 157,700 metric tonnes, according to the U.S. Department of Agriculture. That was well below trade estimates of 250,000 to 800,000 tonnes.
Net old-crop sales were 83,000 tonnes, including heavy cancellations of 206,100 tonnes. Thirty-six weeks into the marketing year, total commitments for 2007-08 are 96% of the USDA's target, which the government raised earlier this month. New-crop weekly exports sales were 74,700 tonnes, the USDA said.
Minneapolis Grain Exchange
MGE March wheat was synthetically trading around US$19.20 at the close, a floor trader said. MGE May wheat closed up 90 cents at US$15.25 and was offered at US$15.45, he said.
Strong demand for U.S. spring wheat and short supplies continue to support the market, an MGE trader said. Japan said it purchased 190,000 tonnes of wheat, including 77,000 tonnes of U.S. dark northern spring wheat, in a tender concluded Thursday.
The MGE on Friday will raise the daily trading limit for hard red spring wheat futures to US$1.35 from 90 cents after the March and May contracts closed limit up, the exchange said. The adjustment means the three U.S. wheat exchanges will all have different daily trading limits. The daily trading limit will remain 60 cents at the Chicago Board of Trade and 90 cents at the Kansas City Board of Trade.
The three exchanges all increased their daily limits to 60 cents from 30 cents as of Monday and said they would increase limits by another 50% if at least two contract months within a crop year closed at limit bid or offer. That happened Tuesday at the MGE and KCBT, so the two exchanges increased their limits to 90 cents from 60 cents.
