June 22, 2007

 

US Wheat Review on Thursday: Mostly up; HRS wheat sales boost MGE

 

 

U.S. wheat futures closed mostly higher Thursday as strong export demand boosted prices amid some lingering concerns about poor yields in the southern Plains, analysts said. Sales of hard red spring wheat boosted Minneapolis Grain Exchange futures prices.

 

Chicago Board of Trade July wheat finished 1 cent higher at US$6.06 per bushel. Kansas City Board of Trade July wheat settled 1 cent higher at US$5.87 1/2, and Minneapolis Grain Exchange July wheat climbed 14 3/4 cents to US$6.05 1/4.

 

The U.S. Department of Agriculture said weekly export sales for the week ended June 14 totaled 541,000 metric tonnes of wheat, 31% above the previous week and above analyst estimates of 150,000 to 400,000 tonnes. Major buyers included Italy, which took 75,000 tonnes; Chile, which bought 73,500 tonnes; and Nigeria, which bought 65,900 tonnes.

 

The solid sales are impressive considering recent high prices, a CBOT floor trader said. There also was bullish chatter that Egypt would re-enter the market soon to buy more wheat, he added.

 

Egypt's cabinet approved a decision to supply its main wheat buyer, the General Authority for Supply Commodities, or GASC, with an extra 2 billion Egyptian pounds (US$351 million) of spending, according to a report. Approval for the spending increase came as a result of a rise in world market prices for commodities, the report said.

 

World 2007-08 wheat supplies are at their tightest levels in 30 years, according to the USDA. That means countries with exportable supplies of wheat will receive higher prices, analysts have said.

 

U.S. producers are expecting to see greater export demand this year as drought-stricken Ukraine has lowered its production expectations and suspended wheat exports until state reserves are formed, an analyst said.

 

Trading was volatile throughout the day session as prices surged on the bullish export news and pulled back on profit-taking and ideas recent rallies were overdone. The range for CBOT July wheat was US$5.93 to US$6.06.

 

Wheat is trading in "pretty rarified territory" above US$6, an analyst said.

 

"Prices are so high," he said. "If you're long, you feel vulnerable. If you're short, you feel vulnerable. If you're out, you feel vulnerable, (thinking) 'Am I going to miss out?' The nervous tension is just really high."

  

 

Kansas City Board of Trade

 

Follow-through buying and the strong export sales kicked KCBT wheat futures higher at the opening, a floor broker said. Prices then consolidated after recent gains, he added.

 

There are still some lingering concerns about poor yields in the southern Plains, but the trade wants more data about Kansas' harvest, traders said.

 

"Some of the early test cutting reports out of southern Kansas said there seem to be poor quality test weights," an analyst said. "That can change as we move north."

 

Showers and thunderstorms have been reluctant to move out of the southern Plains wheat areas, notably in southern central Kansas through Oklahoma and Texas, according to DTN Meteorlogix. However, there will be some improvement in harvest prospects from the Texas Panhandle north through western Kansas, the weather firm said.

 

In that sector of the hard red winter wheat belt, mostly dry and very warm weather is expected. Temperatures will top 90 degrees Fahrenheit in western Kansas through the end of the week, Meteorlogix said Thursday.

  

 

Minneapolis Grain Exchange

 

MGE futures got a strong boost from a sale of 160,000 metric tonnes of U.S. hard red spring wheat for delivery to unknown destinations in the 2007-08 marketing year, a floor broker said.

 

Prices have rallied recently on supply concerns, but the news "turned us from a market that was concerned about supply to a demand market," he said.

 

There was an active trade in the July/September spread, traders said.