July 19, 2007

 

US Wheat Review on Wednesday: Soars on tight supplies, strong demand

 

 

A strong demand outlook and ongoing concerns about tight global supplies shoved U.S. wheat futures sharply higher Wednesday, floor traders and analysts said.

 

Chicago Board of Trade September wheat soared 22 1/4 cents to US$6.23 1/2 per bushel, the contract's highest close since June 28. Kansas City Board of Trade September wheat ended up 20 cents at US$6.06, the contract's highest close since July 13. Minneapolis Grain Exchange September wheat rose 18 cents to US$6.25, the contracts highest close since July 13.

 

Commodity funds bought an estimated 1,000 contracts at the CBOT. In pit trades, Rand Financial and FC Stonnee each bought 400 September. Goldenberg Hehmeyer spread 400 December-May.

 

Wheat futures felt support from market chatter that Morocco is tendering to buy at least 250,000 tonnes of wheat, CBOT floor traders said. Effective June 29, Morocco decreased its customs duties for wheat and durum wheat significantly in hopes of offsetting a sharp increase in global prices market and keeping local bread prices down, according to a U.S. Department of Agriculture attache report from earlier this month.

 

Moroccan imports of wheat and durum wheat will likely soar in 2007 because of the poor crop, the report said.

 

Syria, meanwhile, confirmed it will cancel about 400,000 tonnes of wheat exports, including sales to Egypt, Iraq and Italy, due to a poor crop, traders said. The development should spur additional Iraqi demand for U.S. hard red winter wheat in coming months, according to a market comment from AgResource Company.

 

However, the news about Syria was not unexpected. The trade talked about the potential for export cancellations a few weeks ago.

 

"It doesn't have to be something new everyday" that drives prices higher, a CBOT floor trader said. "It's the same theme" of shrinking global supplies and solid demand.

 

Egypt said Tuesday that it bought 300,000 tonnes of U.S. soft red wheat and 25,000 tonnes of Russian wheat. A breakdown of bids for the tender showed the U.S. has some wheat and Russia has a little, a CBOT floor trader said. The absence of French bids had long-term bullish implications for U.S. wheat, he said.

 

Trade estimates for weekly U.S. wheat export sales range from 250,000 tonnes to 800,000 tonnes. The USDA is slated to release sales figures for the week ended July 15 at 8:30 a.m. EDT Thursday.

 

Concerns about scattered world production problems were also supportive, said Dale Durchholz, senior analyst with AgriVisor. Western Europe has seen untimely rains going into the wheat harvest, and Western Australia is seen as too dry.

 

Argentina slightly raised its forecast for 2007-08 wheat area to 5.55 million hectares, up from 5.5 million hectares seen last month, the Agriculture Secretariat said in its monthly crop report. The forecast for 2006-07 wheat production was raised to 14.6 million tonnes, up from 14.3 million tonnes seen last month.

 

Soil moisture levels are sufficient and Argentina's "economic scenario has become more favorable," the Secretariat said in explanation of the slight increase in the 2007-08 wheat area forecast.

 

 

Kansas City Board of Trade

 

KCBT volume was moderate, a floor trader said. The talk about Morocco's tender was positive, but otherwise there weren't too many fresh developments, he said.

 

"I don't think anybody was really finding anything new to talk about," the trader said.

 

Volume was moderate, with some aggressive bids seen on the screen, the trader said.

 

 

Minneapolis Grain Exchange

 

The CBOT was "definitely the leader" during the day session, a MGE floor broker said. Prices moved higher in a bounce from a mostly lower close Tuesday, he said. U.S. wheat futures bolted higher Tuesday on news of the sale to Egypt but tumbled amid heavy spillover pressure from declines in CBOT corn and soybeans, traders said.

 

Despite a few thunderstorms overnight Tuesday into Wednesday morning, the U.S. Northern Plains spring wheat area is still mostly dry with very hot weather temperatures, DTN Meteorlogix said. The next several days will feature more heat and dryness, diminishing soil moisture will diminish and increasing stress to wheat, the weather firm said.