February 20, 2008

 

US Wheat Review on Tuesday: Mostly up on spillover; Minneapolis Grain Exchange March sinks

 

 

Spillover support from other markets pushed U.S. wheat futures mostly higher Tuesday, although Minneapolis Grain Exchange March wheat sank as traders got out of the nearby contract, analysts said.

 

Chicago Board of Trade March wheat jumped 8 1/2 cents to US$10.36 per bushel, and Kansas City Board of Trade March wheat gained 2 1/2 cents to US$10.84 1/2. MGE March wheat tumbled 75 cents to US$18.60.

 

CBOT and KCBT wheat rose amid borrowed strength from rallies in the neighboring CBOT corn and soy markets and from outside markets, including crude oil and gold, said Doug Houghtonne, analyst for Brock Associates. Soybeans, soybean oil and crude oil hit new all-time highs.

 

The CBOT soy complex rallied amid speculative buying associated with Chinese demand and the bullish influence of outside markets, analysts said. There are expectations that China will increase its purchases of soybeans and soyoil due to losses in its rapeseed crop, an analyst said.

 

Nearby CBOT wheat temporarily slipped into negative territory at times during the day session amid spillover pressure from sharp losses in MGE March wheat, floor traders said. The nearby MGE contract recently has been leading a rally in wheat, and MGE March wheat trimmed its losses before the close.

 

Weekly U.S. wheat export inspections, released during the day session by the U.S. Department of Agriculture, were at the high end of analysts' estimates. The USDA said 20.451 million bushels were inspected in the week ended Feb. 14, while analysts had expected inspections of 15 million to 21 million bushels. For the marketing year to date, total inspections are 927.384 million bushels, up from 612.793 million at the same time last year, according to the USDA.

 

 

Kansas City Board of Trade

 

KCBT wheat futures gained amid strength in the CBOT soy complex and in outside markets, traders said. Weakness in the nearby MGE contract weighed on KCBT March wheat, they said.

 

Market chatter indicated that Iraq bought 50,000 tonnes of U.S. hard red winter wheat, traded at the KCBT, traders said. Iraq bought the wheat at US$420 FOB for end of March to April shipment in its first purchase since last October, according to a media report.

 

The purchase was disappointing because it was so small, Houghtonne said.

 

Beneficial precipitation fell during the weekend in the U.S. southern Plains, including more than 1.5 inches in much of Oklahoma through north-central Texas, DTN Meteorlogix said. However, more moisture is still needed in western Kansas, said Jerry Gidel, analyst for North America Risk Management Services.

 

Next week, the southern Plains look as though they will see a drier weather trend, particularly in the western areas, Meteorlogix said.

 

 

Minneapolis Grain Exchange

 

Nearby MGE March wheat ended sharply lower following a recent run-up to record highs. After the nearby contract hit a record high of US$19.88 on Friday, there were some traders thinking "this maybe is the time to be on the sidelines," despite gains in neighboring and outside markets, Gidel said.

 

MGE wheat futures have soared recently amid concerns about strong demand for spring wheat, traded at the exchange, and tight supplies.

 

"It deserves a break," Mike Krueger, president of The Money Farm, said of MGE March wheat. "We almost touched US$20."

 

Traders were exiting long March/short May spreads, a MGE trader said. MGE March wheat briefly fell limit down, US$1.35 lower, to touch US$18. The contract trimmed gains before the close, but some analysts said they suspect a top may be in.

 

"I think when you nudge up against US$20, I think it might be safe to say we've seen the high," Krueger said.

 

Still, other analysts said there was still potential for prices to push higher if strong demand persists. Japan overnight said it is seeking 151,000 metric tonnes of wheat, including 68,000 tonnes of U.S. dark northern spring wheat, in a tender to be concluded Thursday. Demand from Japan has helped fuel recent gains in MGE spring wheat futures.

 

"They've been buying some hard spring, so to some extent (Japan's tender) in itself suggests it's not completely over," Gidel said.