August 9, 2007

 

US Wheat Review on Wednesday: Fresh 11-year highs on technical buys, tightness

 

 

Technical buying and ongoing fears about tight global supplies on Wednesday catapulted U.S. wheat futures to fresh 11-year and all-time highs, analysts and traders said.

 

Chicago Board of Trade September wheat closed up 16 1/2 cents at US$6.79 per bushel and set a new contract high of US$6.82 per bushel, exceeding the previous high of US$6.66 set Tuesday. The gains pushed CBOT September wheat to a fresh 11-year high for a front-month contract.

 

CBOT December wheat closed up 18 1/2 cents at US$7.01, above the psychologically significant level of US$7. The contract set a new all-time high for a second-month of US$7.04, exceeding the previous contract high of US$6.86.

 

Kansas City Board of Trade September wheat finished 14 cents higher at US$6.62. The contract set a fresh 11-year high for a front-month of US$6.66, topping the contract's previous high of US$6.59 1/2. KCBT December wheat closed up 13 3/4 cents at US$6.78 and hit a new contract high of US$6.81, topping the previous high of 6.68 1/2.

 

Minneapolis Grain Exchange September wheat settled 14 cents higher at US$6.71 1/4 and set a new contract high of US$6.72 1/2, exceeding the previous high of US$6.59. MGE December wheat closed 12 cents higher at US$6.77 and set a fresh contract high of US$6.79 1/2, exceeding the previous high of US$6.70.

 

Wheat soared amid continued concerns about tight world stocks and production problems in key growing areas, including Europe and the Black Sea region. Buy stops were triggered during the rally, bringing in more technical buying and pushing prices higher, traders said.

 

Commodity funds bought an estimated 2,000 contracts at the CBOT. In pit trades, Bunge bought 400 September, and Fimat sold 400 December.

 

The rally appeared to be "mainly money led," said Tom Leffler, owner of Leffler Commodities in Augusta, Kan. "There was not that much fresh news out there in the marketplace."

 

There was some positioning ahead of the release of the U.S. Department of Agriculture's crop production and supply/demand reports Friday, a CBOT floor broker said. Traders don't want to be long going into the reports amid expectations for a decline in U.S. and world ending stocks, an analyst said.

 

The average analyst estimate for 2007-08 U.S. wheat carryout is 402 million bushels, down from the USDA's July estimate of 418 million, according to a Dow Jones Newswires survey. Strong demand for U.S. wheat calls for a decline in the stocks, analysts said.

 

The USDA will release weekly export sales figures Thursday, and there are expectations for high numbers, traders said. Trade estimates call for sales for the week ended Aug. 2 to be 600,000 to 1.05 million metric tonnes.

 

Export business has been strong for the past two weeks. For the week ended July 19, the U.S. racked up its highest export sales since June 1996, according to the USDA.

 

The U.S. has seen solid demand because few other countries have enough wheat to export, analysts said.

 

Egypt on Tuesday bought 145,000 tonnes of Russian wheat, but the sale was still supportive for U.S. futures because it took grain off the world market, an analyst said. Egypt's state-owned Food Industries Holding Company, or FIHC, on Wednesday bought 88,000 metric tonnes of Russian or U.S. soft red wheat, at the seller's option, traders said.

 

 

Kansas City Board of Trade

 

Trading was "hectic" Wednesday at the KCBT as prices sailed sharply higher, a floor trader said. The rally "caught everyone by surprise because we weren't trading on much news today," he said.

 

Technical buying came in as buy stops were triggered, the trader said. Market participants are waiting for the USDA reports to come out to see the agency's revised estimates for harvested acreage in Kansas and Oklahoma, Leffler said.

 

The USDA's National Agricultural Statistics Service will release an updated survey of winter wheat harvested acreage Friday. NASS resurveyed producers in Kansas and Oklahoma following flooding in June.

 

 

Minneapolis Grain Exchange

 

Some inter-market buying form the CBOT allowed MGE wheat futures to keep gaining with the Chicago market, a MGE floor trader said. Market-on-close selling came in at the end of the session and weighed on prices a bit, he added.

 

Expectations for strong weekly export sales seemed to be underpinning gains, the trader said. Advances in CBOT corn and soybeans also were friendly, he said.