September 26, 2007

 

US Wheat Review on Tuesday: Ends up on demand, but off session highs

 

 

U.S. wheat futures rose Tuesday, hitting new highs at the Kansas City Board of Trade and Minneapolis Grain Exchange on steady demand and continued concerns about extreme dryness in Australia, traders said.

 

The markets trimmed gains on a late round of profit-taking, they said.

 

Chicago Board of Trade December wheat closed up 9 1/2 cents at US$8.87 1/4 per bushel, down from its session high of US$9.05. The all-time high for CBOT wheat is US$9.11 1/4.

 

Kansas City Board of Trade December wheat set a new high of US$8.87, exceeding the previous high of US$8.80. The contract finished up 8 1/2 cents at US$8.73 1/4.

 

Minneapolis Grain Exchange December wheat settled 3 1/2 cents higher at US$8.36. MGE March wheat set a new high of US$8.60, exceeding the previous high of US$8.53, before closing up 2 cents at US$8.43 1/4.

 

Prices climbed on ideas the pace of U.S. export business will remain strong amid tight global supplies, traders said. There are a good number of tenders hanging over the market, they added.

 

The U.S. Department of Agriculture announced export sales of 330,000 metric tonnes of hard red winter wheat for delivery to Algeria during the 2007-08 marketing year. The sale was bigger than expected, a trader said.

 

Pakistan said it was seeking 100,000 metric tonnes of wheat in a tender to be concluded Oct. 8, and Turkey said it needs to import 800,000 tonnes by May 2008. Unfavorable weather conditions, especially drought, hit Turkey's wheat crop this year.

 

The Grain Board of Iraq on Monday issued a tender to buy a minimum of 50,000 metric tonnes of hard wheat but will probably buy much more, a CBOT floor trader said. The USDA last week announced private export sales of 700,000 metric tonnes of U.S. HRW wheat for delivery to Iraq in the 2007-08 marketing year.

 

"We had a little bit of Algerian business and some other talk about Mideast places poking around," such as Turkey, said Jerry Gidel, analyst with North America Risk Management Services.

 

Commodity funds bought an estimated 3,000 contracts at the CBOT. The upside was the path of least resistance, an analyst said.

 

A lack of sellers in the market helped prices rise sharply in relatively thin, choppy activity, traders said. Traders were reluctant to sell amid concerns about ongoing dryness in Australia, they said.

 

Australia's wheat areas have a chance for light showers in the southeast during Tuesday and Wednesday, according to DTN Meteorlogix. Otherwise, dry conditions remain in place, with only a few light showers during the next week, the weather firm said.

 

There is no change to the overall dry weather pattern in the major wheat areas expected during the next 10 days, Meteorlogix said. Crop losses will increase as the crop moves through its heading stage during the next few weeks, according to the firm.

 

On the U.S. cash grain market, prices paid for wheat rebounded to renewed record highs again this week, ending Monday's day-trading session with most classes of wheat worth an average of about US$7.40-US$8.00 a bushel at the farm gate.

 

Elevator bids for spring and winter wheat have appreciated by approximately US$3 thus far in 2007, with prices soaring US$1.15-US$1.35 during September alone. Durum has made even more dramatic gains, with national average market prices exploding US$2 higher in just the past 12 days, to also establish new all-time record highs of more than US$11 a bushel.

 

 

Kansas City Board of Trade

 

KCBT wheat futures were seen as a follower of the CBOT, and the market "struggled to keep pace" with Chicago, a KCBT floor trader said. The Algerian sale was for about 130,000 tonnes more than traders expected, which was bullish for the market, he said. HRW wheat, used to make bread, is traded at the KCBT.

 

It seemed as though the Pakistan and Turkey news was already factored into the market, the trader said. Pakistan said Sept. 18 that it planned to hold an international tender for wheat in the near future.

 

"All the news was in the market," he said.

 

U.S. Southern Plains and Delta areas have generally favorable conditions for winter wheat planting, according to Meteorlogix. A few showers crossing the Southern Plains this week are good for early growth of wheat while causing only minor planting delays, the firm said. The southwest could still use more rain for the new wheat crop.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures followed gains at the CBOT, a MGE floor trader said. Volume was light, and activity was choppy, he said.

 

Moving forward, the market will continue to look for any fresh demand news that comes out, along with any changes in forecasts for weather in Australia's wheat belt, the trader said. There was chatter that production Down Under could fall as low as 12 million tonnes, down from the 15.5 million estimated this month by the Australian Bureau of Agricultural & Resource Economics, traders said.

 

The trade also continues to wait for news about a possible export duty in Russia, a MGE trader added.