February 26, 2008

Supply fears shove MGE March wheat to record US$23 a bushel

US wheat futures exploded Monday (February 26, 2008), with nearby Minneapolis Grain Exchange March wheat climbing well above the landmark price of US$20 per bushel on supply fears, traders said.

MGE March wheat surged US$3.75 to hit a record of US$23.00 per bushel in early activity. The MGE has removed daily trading limits for the spot-month March future and raised daily trading limits for deferred contracts to 90 cents.

Short supplies of high-protein spring wheat, traded at the MGE, are encouraging the rally, traders said. Word that Kazakhstan will restrict grain exports reignited concerns about tightness, they said.

Kazakhstan will curb grain exports by imposing custom duties starting March 1, according to reports. The majority of the country's grain exports are wheat.

Kazakhstan "has good quality wheat usually for export," said Bill Nelson, associate vice president of AG Edwards & Sons, in a note to clients. "Its withdrawal is bullish for Minneapolis and Kansas City wheat."

The sharp rally at the MGE gave strength to Chicago Board of Trade and Kansas City Board of Trade wheat futures, traders said. CBOT and KCBT March and May wheat jumped the exchanges' daily limit of 60 cents.

CBOT May wheat soared 60 cents to US$11.24 1/2. KCBT May wheat was 60 cents higher at US$11.75.

In other news, Turkey said it will receive bids in a tender for up to 200,000 tonnes of wheat, according to a report. Bids will be received Tuesday, and the results of the tender will be issued Wednesday, an official said. The government, meanwhile, is planning to hike its customs duty on wheat and rye exports to 50 percent from zero starting May 15, traders said.