August 23, 2007

 

US Wheat Review on Wednesday: Soars to fresh historic highs on demand

 

 

U.S. wheat futures soared to fresh 11-year and all-time highs Wednesday on bullishness about demand and technical strength, with Chicago Board of Trade December wheat touching limit up during the session.

 

CBOT September wheat ended up 27 cents at US$7.18 1/2 per bushel and set a fresh 11-year high for a front-month contract of US$7.20, exceeding the previous day session high of US$6.97. The contract also traded above a price level many wheat industry members consider to be the unofficial all-time high for a front-month CBOT wheat contract.

 

CBOT December wheat settled 27 3/4 cents higher at US$7.31 3/4 and set a fresh all-time high for a second-month contract of US$7.34, exceeding the previous day session high of US$7.14 1/2. The contract briefly traded limit up, or 30 cents higher, before trimming gains a bit.

 

Kansas City Board of Trade September wheat finished 12 cents higher at US$6.67, and KCBT December wheat closed up 11 1/2 cents at US$6.80 1/2. Minneapolis Grain Exchange September wheat closed 13 1/2 cents higher at US$6.62, and MGE December wheat settled 13 cents higher at US$6.71 1/2.

 

Despite high prices, the U.S. has attracted strong export demand this summer amid production problems in Europe and the Black Sea region. The buying trend looks as though it will continue in the near term as traders wait to see how much wheat the Southern Hemisphere will produce, an analyst said.

 

Australia, a major world exporter, is off the global market until it can harvest its wheat after a drought devastated last year's crop, traders said. There are concerns dryness in parts of Australia and Argentina will affect output.

 

Fresh speculative buyers entered the market after Egypt on Tuesday bought 240,000 metric tonnes of U.S. soft red winter wheat and 210,000 tonnes of Russian wheat in a tender, a CBOT floor trader said. Commodity firms bought an estimated 6,000 contracts at the CBOT.

 

India also said it would tender for wheat Thursday. The U.S. is not expected to win any of the business due to disagreements over quality requirements, but the tender will still take wheat off the world market, says Mike Zuzolo, analyst with Risk Management Commodities.

 

World wheat ending stocks are already pegged at the lowest level since 1981-82.

 

If India buys wheat from Russia, Russia may not have too much left to sell this fall, Zuzolo said. That could steer more business to the U.S.

 

CBOT September wheat traded above US$7.17 during the day session, which is considered by many to be the unofficial all-time high for a front-month CBOT wheat contract.

 

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, set in April 1996, because the higher March price was reached in thin trade as a contract was expiring.

 

Many wheat industry members exclude the US$7.50 high from historical price studies because they do not think contracts being traded in delivery are representative of true market prices. Looking ahead, it seems likely CBOT September wheat may touch US$7.50 again, traders said.

 

CBOT September wheat is 31 1/2 cents from US$7.50 and CBOT December wheat is 18 1/4 cents away.

 

"There is nothing technically standing in your way of going back to that 1996 high," Zuzolo said.

 

In CBOT pit trades, MF Global bought 1,000 December and sold 200 December, while Rosenthal bought 800 December and sold 500 December.

 

 

Kansas City Board of Trade

 

KCBT wheat futures felt spillover support from the rally at the CBOT, a floor trader said. Strong demand remains supportive to prices, but "Chicago was clearly the leader," he said.

 

The U.S. Department of Agriculture is slated to release weekly export sales figures at 8:30 a.m. EDT Thursday. The report will include a sale of 415,000 tonnes of U.S. soft red wheat to Egypt last week, and trade estimates call for wheat exports to range from 700,000 to 1.2 million bushels.

 

In other news, the U.S. Southern Plains have a "promising soil moisture profile" for planting winter wheat for harvest in 2008, DTN Meteorlogix said.

 

 

Minneapolis Grain Exchange

 

The best areas for winter wheat in the world at this time are the U.S. Northern Plains and Canadian Prairie, according to Meteorlogix. There will be some cool weather for harvest in those areas, but there will be few significant delays in cutting, the weather firm said.

 

In European markets, London-based wheat traded on Liffe set a new record high Wednesday, which provided some spillover support for U.S. wheat, an analyst said. A National Farmers Union report said rains kept harvest progress in England and Wales at a near standstill for the week ending Aug. 21.