March 13, 2008

 

US Wheat Review on Wednesday: Rallies hard on tight supplies, technical buys

 

 

Technical buying and ongoing supply concerns shoved U.S. wheat futures sharply higher Wednesday, analysts said.

 

Chicago Board of Trade May wheat ended up 59 1/2 cents at US$12.82 1/2 per bushel. That represents a record-high close for a CBOT May wheat future, said Vic Lespinasse, analyst for Illinois Grain.

 

Kansas City Board of Trade May wheat jumped 67 1/4 cents to US$13.28 1/4. Minneapolis Grain Exchange May wheat surged 80 1/4 cents to US$15.16 3/4.

 

Deferred months also climbed. CBOT July wheat, which represents the new crop, scored a new contract high of US$12.70, exceeding the previous high of US$12.65.

 

The markets found strength from technical buying and fears about tightening supplies, analysts said. Wheat futures closed limit up Tuesday after the U.S. Department of Agriculture said 2007-08 domestic wheat ending stocks were down from the previous month.

 

"Yesterdays report refocused us on these tight stocks," said Jason Britt, broker and analyst for Central State Commodities. "If the crop comes in fine thats out there, well be all right. If anything goes wrong with whats growing out there right now, here we go again."

 

Trading remained highly volatile. It does not take much to send prices running sharply higher or lower, analysts said. Commodity funds bought an estimated 5,000 contracts at the CBOT.

 

Wheat began the session under pressure, with some profit-taking seen after Tuesdays rally. However, old-crop months began to climb and pulled the rest of the contracts with them.

 

"It just takes very little to light a fire under this market," Britt said. "With those razor-thin margins in the stocks, were probably going to stay that way."

 

CBOT was seen leading the charge higher, analysts said. Some traders unwound spreads in which they were short CBOT wheat and long in other markets, said Mike Krueger, president of The Money Farm.

 

"As theyve been exiting long positions in other markets and unwinding long everything else/short Chicago wheat, thats been bringing buying into this thing," Krueger said.

 

In other news, the French state grains board, LOffice National Interprofessionnel des Grandes Cultures, raised its forecast for 2007-08 French soft wheat exports to destinations outside the E.U. by 200,000 tonnes to 4.8 million tonnes. NIGC said French wheat is one of the only origins readily available to respond to northern African demand. ONIGC said 550,000 tonnes of wheat was loaded out of France in February, up from less than 300,000 tonnes in January.

 

 

Kansas City Board of Trade

 

KCBT July wheat approached its contract high but did not top it as CBOT July wheat did. The session high for KCBT July wheat was US$13.00, compared to the contract high of US$13.20.

 

The USDA reported Algeria canceled a deal to buy 100,000 tonnes of U.S. hard red winter wheat, traded at the KCBT. The news was bearish but traders shook it off as few sellers wanted to stand in front of the rally, a KCBT floor trader said.

 

A European trader said the business would likely be switched to French grain. Algeria traditionally buys French wheat.

 

There are concerns about a lack of rain in wheat-growing parts of the U.S. Plains, although a storm system late this week will bring needed moisture to many of the driest areas, according to Cropcast Agricultural Weather. An average of 1 inch of precipitation is headed for much of Nebraska, western Kansas and eastern Colorado, the private weather firm said.

 

The Oklahoma panhandle and southwestern Kansas should stay mainly dry, Cropcast said. However, parts of the region could see additional rains by early next week, the firm said.

 

 

Minneapolis Grain Exchange

 

MGE May wheat was more than US$1.00 higher at times during the session but trimmed gains before the close. Tight supplies of hard red spring wheat, traded at the MGE, continued to be supportive, an analyst said.

 

There also was continued talk about a Turkish tender for wheat issued Tuesday. Turkeys state grain board issued a tender to buy 500,000 tonnes of the wheat and set a bidding deadline of March 18, according to the Ihlas News Agency.

 

There are some expectations that 250,000 tonnes could come from the U.S. and 250,000 tonnes could be optional origin, according to a note from Midwest Market Solutions. Shipment is set for March and April.

 

Gains at the CBOT also helped pull MGE wheat higher, a trader said.

 

"Chicago has been leading the rally for the most part," said Alan Brugler, president of Brugler Marketing & Management.