February 16, 2008

 

US Wheat Review on Friday: Settles mixed as Minneapolis Grain Exchange March hits new high

 

 

U.S. wheat futures closed mixed Friday, as the nearby Minneapolis Grain Exchange contract notched another new all-time high amid ongoing concerns about tight spring wheat supplies, traders said.

 

Chicago Board of Trade March wheat slipped 4 1/2 cents to US$10.27 1/2, a decline of 65 1/2 cents on the week. Kansas City Board of Trade March wheat tumbled 12 cents to US$10.82, down 58 1/2 cents on the week. MGE March wheat surged 82 cents to US$19.35, an increase of US$3.82 on the week.

 

Trading was choppy during the day session, with some profit-taking seen ahead of the long holiday weekend, CBOT traders said. U.S. wheat markets will be closed Monday in observance of Presidents Day.

 

Positions also were rolling out of the nearby March contract and into the May contract, a CBOT trader said. CBOT May wheat closed 1 cent higher at US$10.42.

 

Before closing lower, CBOT March wheat felt early spillover support from the strong gains in MGE March wheat, traders said. Although MGE March wheat scored another new all-time high, there are ideas CBOT March wheat hit its near-term high Monday in a move to US$11.53.

 

The CBOT, KCBT and MGE continue to have different daily trading limits for wheat. The limit is 60 cents at the CBOT, 90 cents at the KCBT and US$1.35 at the MGE.

 

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. Two old-crop MGE contracts closed at the expanded limit Thursday, so the exchange raised its limit to US$1.35.

 

In the news, the Argentine government told exporters it will not accept new export declarations for wheat shipped prior to March 17. At the end of January, the Agriculture Secretariat announced in a press release that an additional 2 million metric tonnes - or 400,000 tonnes per month over the next five months - would be made available for export, effective the day after publication in the Official Bulletin on Jan. 30.

 

India's federal government, meanwhile, has asked provinces to increase their wheat procurement during the crop marketing year starting in April from the average 14 million to 15 million metric tonnes in order to build up stocks, a government official said. Low procurement of wheat at around 12 million tonnes last year had made the country rely on imports of the grain despite high global prices.

 

 

Kansas City Board of Trade

 

KCBT March wheat came under pressure from profit-taking and a roll of positions out of the nearby contract, a floor trader said. However, KCBT March wheat would have likely been under "quite a bit more pressure" if MGE March wheat had not rallied as hard as it did, said Jason Britt, broker and analyst at Central State Commodities.

 

Traders at the KCBT are trying to find a "fair value" for hard red winter wheat, a floor trader said. Volume was relatively light ahead of the weekend, he said.

 

KCBT May 2009 wheat temporarily rose the daily, exchange-imposed limit of 90 cents. The contract ended up 89 cents at US$10.25.

 

HRW wheat areas in the U.S. southern Plains are on track to see some beneficial moisture Friday night and on Saturday, said Drew Lerner, president of World Weather Inc. The area spanning from north-central Texas, near Dallas, northward through central Oklahoma and southeastern Kansas will receive 0.5 to 1.5 inches of precipitation, he said.

 

The Texas Panhandle through northeast Kansas will see 0.10 to 0.5 inch. Western Texas is most in need of precipitation and will still need more after the weekend storms pass, Lerner said.

 

 

Minneapolis Grain Exchange

 

MGE March wheat on the screen briefly surged the daily, expanded limit of US$1.35 to reach a new record high of US$19.88. The contract then trimmed gains.

 

Strong demand for spring wheat, traded at the MGE, and tight supplies continue to support the market, traders said. MGE wheat futures are operating as if the market is in a "world of its own" compared to CBOT and KCBT wheat, Britt said.

 

"Minneapolis is kind of on its own little island," added Brian Henry, broker at Archer Financial Services.

 

Japan has been a steady buyer of U.S. spring wheat. However, there are some ideas that demand could slow now that the government has said it will increase the price at which it sells wheat to flour millers by 30% starting April 1. Still, it will take awhile before the increases reaches consumers, Henry noted.

 

"The reason prices go up in a short supply market is to restrict demand," Henry said. "Eventually some of that has got to take place."

 

In other news, wheat and barley revenues in Western Canada last year increased to the highest level seen in a decade, according to the Canadian Wheat Board's annual 2006-07 report entitled "Farmers First." CWB revenues for wheat and barley rose by CUS$1.45 billion in 2006/07 to sit at CUS$4.95 billion, with 91% of that amount returned to Western Canadian producers, according to a news release.