August 15, 2007

 

US Wheat Review on Tuesday: Rallies on significant sale to Egypt

 

 

U.S. wheat futures sailed to new contract highs Tuesday on a surprisingly large sale to Egypt and growing fears about tight global supplies, analysts said.

 

Chicago Board of Trade September wheat settled 26 cents higher at US$6.92 1/2 per bushel. CBOT December wheat ended 20 1/2 cents higher at US$7.11, above the previous contract high of US$7.10 1/2.

 

Kansas City Board of Trade September wheat rose 17 1/2 cents to US$6.72 1/4, and KCBT December wheat settled up 9 cents at US$6.83. Minneapolis Grain Exchange September wheat climbed 13 1/4 cents to US$6.74 1/4, and MGE December wheat finished up 13 1/2 cents at US$6.79 1/4.

 

Prices are flirting with all-time highs, although there is some disagreement over the record. Technically, the top price for a nearby CBOT wheat contract of US$7.50 was set in March 1996. However, many in the trade consider US$7.17 to be the record because the higher price was reached in thin trade as a contract was expiring.

 

Wheat closed in on the unofficial high after Egypt said it bought 415,000 metric tonnes of U.S. wheat and 25,000 tonnes of Russian wheat. The sale was particularly bullish because recent Egyptian tenders have resulted only in purchases from Russia, said Bill Nelson, associate vice president of AG Edwards & Sons in St. Louis.

 

Egypt is one the biggest importers of wheat on a global scale and has been an active buyer on price breaks this summer. Still, it probably has a bit more buying left to do amid global production problems, Nelson said.

 

Syria on Tuesday reiterated its plan to cancel exports of 200,000 metric tonnes of wheat to Egypt due to adverse weather and said negotiations were ongoing over another 500,000 tonnes. The news bodes well for the possibility of future U.S. sales, Nelson said.

 

Traders will continue to await fresh demand export news to direct prices, analysts said.

 

The U.S. has seen strong demand this year as unfavorable conditions in other areas, including Europe and the Black Sea Region, have slashed output expectations.

 

France on Tuesday shaved its estimate for 2007-08 soft wheat production by 1.5 million tonnes from late July. Wet weather expected in western Europe this week could cause further losses, forecasters said.

 

Australia's developing wheat crop, meanwhile, may not live up to expectations. Although there is still time for plants to bloom, ongoing dryness is impacting wheat in key producing areas, including Queensland and northern New South Wales, analysts said.

 

Commodity funds bought an estimated 2,000 contracts at the CBOT.

 

 

Kansas City Board of Trade

 

KCBT December wheat set a session high of US$6.94, exceeding the previous contract high of US$6.86.

 

The sale to Egypt was "very bullish," although it was considered to be more supportive at the CBOT, where soft red winter wheat is traded, a KCBT floor broker said. Strong demand expectations in general continue to lead prices higher, he said. Iraq may buy up to 200,000 tonnes of Canadian or U.S. wheat this week, according to a news report.

 

 

Minneapolis Grain Exchange

 

The U.S. spring wheat crop lost three percentage points in its crop condition rating from the previous week with 66% of the crop in good-to-excellent condition. Dry conditions in Montana pushed crop conditions to 31% in good-to-excellent condition from 46% the previous week. Idaho also lost five percentage points while North Dakota lost two percentage points.

 

The crop is still thought to be in above-average condition, so the trade did not pay much attention to the crop ratings. Egypt was the big story of the day, a MGE floor trader said.