March 12, 2008

 

US Wheat Review on Tuesday: Soars on USDA data, turkey, money flows

 

 

U.S. wheat futures soared to daily, exchange-imposed limits Tuesday after the government said domestic ending stocks were tighter than a month ago.

 

A Turkish tender for wheat and continuing money flows into the markets added fuel to the rally, traders said.

 

Most-active Chicago Board of Trade May wheat closed limit up, or 60 cents higher, at US$12.23 per bushel. Kansas City Board of Trade May wheat rose the 60-cent limit to US$12.61. Minneapolis Grain Exchange May wheat surged the expanded limit of 90 cents to US$14.36 1/2.

 

Spot-month March U.S. wheat futures are trading without limits because they are in delivery. CBOT March wheat traded as much as US$1.55 higher in open auction before closing up US$1.00 at US$12.40.

 

The U.S. Department of Agriculture lowered its forecast for 2007-08 U.S. wheat ending stocks to 242 million bushels from 272 million in February. That was at the low end of analysts' pre-report estimates, which ranged from 242 million to 272 million, and below the average analyst estimate of 263 million.

 

The USDA trimmed its projection for hard red spring wheat, hard red winter wheat and durum stocks. However, it left the forecast for stocks of soft red winter wheat, traded at the CBOT, unchanged at 32 million bushels.

 

There are concerns that the old-crop supplies will continue to tighten before the new crop comes online, said Jim Bower, owner of Bower Trading.

 

"The crop really is not coming into the pipeline yet," Bower said. "We still haven't bridged that distance."

 

The USDA increased its forecast for world wheat ending stocks to 110.4 million metric tonnes from 109.7 million in February. Still, traders focused more on the shrinking domestic situation than on global supplies, an analyst said.

 

But there were some questions about whether the supply fundamentals were bullish enough to account for the strong rally considering that prices climbed Monday ahead of the report. The markets were being dominated by money flows, said Tom Leffler, owner of Leffler Commodities.

 

"I have a hard time justifying today after we went up the way we did yesterday," said Tom Leffler, owner of Leffler Commodities. "It's still a money game."

 

Commodity funds bought an estimated 3,000 contracts at the CBOT.

 

 

Kansas City Board of Trade

 

KCBT May wheat ended limit up and was synthetically trading between 1 and 10 cents higher near the close, a floor trader said. It last traded around 5 cents higher, he said.

 

KCBT March wheat, which is not restricted by limits, closed up 60 cents at US$12.50. It traded as much as 85 cents higher before trimming gains.

 

KCBT July wheat, which represents the new crop, was limit up during the day session but backpedaled a bit at the close. The contract ended up 55 cents at US$12.20.

 

Stocks of hard red winter wheat, traded at the KCBT, were pegged at 106 million bushels, down from 121 million last month, according to the USDA. There also are continued concerns about dryness in the western Plains, Bower said.

 

The Southern Plains should be mostly dry Wednesday, DTN Meteorlogix said. Precipitation will continue with near to above-normal levels in the northern and eastern Plains and near to below-normal amounts to the southwestern Plains, the private weather firm said.

 

"A big rain through that western hard red winter wheat belt, I think, would soften this market up pretty fast," Bower said.

 

 

Minneapolis Grain Exchange

 

MGE May wheat closed limit up and was synthetically bid about 30 cents higher at the close, floor trader said. Most of synthetic trades occurred at even loftier levels of about 70 to 80 cents higher, he said.

 

Spot-month MGE March wheat finished US$1.00 higher at its session high of US$17.00. The USDA's cut in U.S. ending stocks "helped exasperate the shortage" fears surrounding hard red spring wheat, traded at the MGE, a floor trader said.

 

The USDA pegged stocks of HRS wheat at 63 million bushels, down from 73 million in February. Durum stocks were lowered to 14 million from 19 million.

 

There also was talk on the trading floor about a Turkish tender for 500,000 metric tonnes of milling wheat. Turkey's state grain board issued a tender to buy the wheat and set a bidding deadline of March 18, according to the Ihlas News Agency. Shipment is for March and April.

 

"Turkey is the big deal," a floor trader said.

 

The U.S. may see some of the Turkish business, although it is not certain, Leffler said. Turkey's grain production is traditionally enough for domestic needs, but drought forced it to issue international tenders.