September 6, 2007

 

US Wheat Review on Wednesday: Ends limit up, sets fresh all-time highs

 

 

U.S. wheat futures Wednesday ended limit up in contracts at all three exchanges for the second day in a row after setting fresh record highs on fears about supply shortages and strong demand, traders said.

 

Chicago Board of Trade September wheat closed up 35 1/2 cents at US$8.42 1/2 per bushel after setting a new all-time high of US$8.55. The new record exceeded the previous high of US$8.37 set in overnight trading.

 

CBOT December wheat closed limit up, 30 cents higher, at US$8.35 1/2. CBOT March wheat rose 30 cents to US$8.31 1/4.

 

At the Kansas City Board of Trade, December wheat settled 30 cents higher at US$7.91 1/4. KCBT March wheat closed up 30 cents at a new all-time high of US$7.93 1/2, exceeding the previous high of US$7.63 1/2.

 

Minneapolis Grain Exchange December wheat ended up 30 cents at US$7.71 1/2. MGE March wheat finished 30 cents higher at a new high of US$7.85, exceeding the previous high of US$7.55.

 

Prices soared after Egypt's state-owned General Authority for Supply Commodities said it bought 300,000 tonnes of mixed U.S. wheat and 170,000 tonnes of Russian wheat. The trade was surprised Egypt issued the tender Tuesday with prices at unprecedented high levels, and the sale was seen as bullish, an analyst said.

 

Iraq, meanwhile, bought 200,000 metric tonnes of hard red winter wheat from private exporters for delivery during the 2007-2008 marketing year, according to the U.S. Department of Agriculture.

 

The sales caused wheat futures to jump higher amid ideas that end users were in "panic mode" and scrambling to meet their needs, traders said.

 

On Monday, India announced it had bought nearly 800,000 tonnes of wheat. India probably didn't buy U.S. wheat, but the purchases still took a significant quantity of grain off the world market when supplies are historically tight, traders said.

 

Many U.S. wheat futures contracts closed limit up Tuesday with support from the news about India. After the recent frenzy of buying and sharp rallies, there are ideas the wheat markets may be nearing a top, analysts said.

 

"I think in the back of everybody's minds, they're thinking that wheat is looking at being near a top," one analyst said.

 

It is difficult to say how high wheat futures will climb because prices are already at all-time highs, added Dale Durchholz, analyst with AgriVisor in Bloomingtonne, Ill.

 

"You're just in totally uncharted territory," he said.

 

Uncertainty about South American production also will continue to keep the trade on its toes, a CBOT floor broker said. A blast of hot and dry wind early this week has withered West Australia's wheat crop, according to DTN Meteorlogix. The Meteorlogix forecast calls for light showers in a portion of Queensland during the next couple days, and some showers Thursday or Friday in West Australia. Otherwise, little appreciable rain is expected in the wheat belt during at least the next week, the weather firm said.

 

In Argentina, rainfall will be needed in most of this area to ensure favorable development of wheat during the spring, Meteorlogix said. Wednesday charts suggested at least some chance for significant rainfall later this weekend and early next week, according to the firm.

 

 

Kansas City Board of Trade

 

Higher European wheat values and sales of HRW wheat, which is traded at the KCBT, boosted prices, traders said. Egypt has been buying mainly soft red winter wheat, traded at the CBOT, so it was supportive to see HRW wheat in the tender, a floor trader said.

 

Iraq is not considered a "reliable buyer" but the sale was still "definitely friendly," the trader said.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures rallied on worries about shrinking world supplies, traders said. The market seems "a little heavier" Wednesday than on Tuesday, but there is still the potential for prices to advance further, a trader added.

 

The U.S. spring wheat harvest is wrapping up, an analyst noted.