September 12, 2007

 

US Wheat Review on Tuesday: New all-time highs going into USDA report

 

 

U.S. wheat futures Tuesday surged to fresh all-time highs at all three exchanges, with some contracts ending limit-up amid late panic buying ahead of a government crop report, floor traders said.

 

Chicago Board of Trade December wheat temporarily traded limit up, 30 cents higher, before closing 29 1/2 cents higher at US$8.90 1/2 per bushel. CBOT March wheat ended limit up at a new all-time high of US$8.91 1/2, exceeding the previous intraday high of US$8.72.

 

Kansas City Board of Trade September wheat settled 30 cents up at a new all-time high of US$8.60, exceeding the previous intraday high of US$8.38. KCBT December wheat ended 30 cents higher at US$8.59.

 

Minneapolis Grain Exchange December wheat ended 29 cents higher at US$8.27. MGE March wheat set a new record high of US$8.30, exceeding the previous intraday high of US$8.07, and closed up 27 cents at US$8.29 1/2.

 

KCBT and MGE wheat futures set new highs in early trading, but CBOT wheat futures did not move into uncharted territory until late in the session. After CBOT December and March wheat climbed above the previous high, there was nothing to hold the market back, a CBOT floor analyst said.

 

"It was just like, 'Kaboom!'" he said.

 

Panic buying came in, with traders afraid to go into Wednesday's U.S. Department of Agriculture supply and demand report without coverage, the floor analyst said. The report, due out at 8:30 a.m. EDT, is expected to include bullish reductions in world stocks and output estimates.

 

The USDA will likely cut its U.S. carryout estimate due to strong export sales and cut its world crop forecasts following unfavorable weather, analysts said. The average trade estimate for 2007-08 U.S. wheat carryout is 376 million bushels, down from the USDA's August estimate of 404 million, according to a Dow Jones Newswires survey of 14 analysts.

 

Analysts said the USDA may slash production forecasts for Australia, Argentina, Canada and the E.U. On Thursday, analytical report Strategie Grains is slated to be released with fresh E.U. crop forecasts.

 

Australia has seen "disappointing rainfall" totals in parched wheat growing regions, said Tom Leffler, owner of Leffler Commodities in Augusta, Kan. World supplies are pegged at historically low levels, and traders had been hoping a strong Australian crop would ease global tightness.

 

It appears the most significant rain totals should remain confined to the western portions of Western Australia's wheat belt, while eastern areas remain unfavorably drier, T-Storm Weather said in an update to its daily forecast. A major precipitation event is not forecast for the next seven to 10 days, according to the weather firm.

 

Commodity funds bought an estimated 4,000 contracts at the CBOT.

 

 

Kansas City Board of Trade

 

KCBT wheat futures followed the path of least resistance to fresh record highs, a floor trader said. Speculative buying ahead of the report also boosted prices, he said.

 

"People are thinking right now that the worst thing to do is to sell into this market" going into Wednesday's crop report, the trader said.

 

Demand still looks as though it is staying strong, traders said. Japan issued a routine tender for 155,000 metric tonnes of wheat, and Egypt's state-owned Food Industries Holding Company is tendering to buy 55,000 tonnes of wheat, including U.S. hard red wheat.

 

The USDA on Monday afternoon said 6% of the winter wheat crop was planted as of Sunday, down from 8% last year and the five-year average of 10%. The markets ignored that news as it is too soon to be worried about winter wheat seeding, traders said.

 

"I don't see a problem out here getting the wheat in the ground," Leffler said.

 

 

Minneapolis Grain Exchange

 

The market remained focused on Australia as fears built about supply shortages, a MGE floor trader said. Volume wasn't particularly heavy with traders reluctant to sell before the USDA report, he said.

 

An updated all-wheat stocks estimate from Statistics Canada was seen as bullish, traders said. Statistics Canada pegged stocks as of July 31 at 6.828 million metric tonnes, below pre-report trade estimates of 7 million to 8 million.

 

"You keep finding friendly things out there to support a market that already has everything going for it," Leffler said about wheat. "At the moment, I think it's just hard to stop the momentum of the market."