September 28, 2007

 

US Wheat Review on Thursday: Demand sparks rally to record highs

 

 

U.S. wheat futures jumped to fresh all-time highs at all three exchanges Thursday on sizzling export sales and bullish technical momentum, analysts said.

 

Nearby Chicago Board of Trade December wheat hit a new high of US$9.46 1/2 per bushel before closing up 15 3/4 cents at US$9.33. CBOT March wheat rallied to a record of US$9.49 before finishing up 14 1/2 cents at US$9.35 1/2. The previous all-time high price at the CBOT was US$9.42.

 

Kansas City Board of Trade December wheat set a new all-time high of US$9.26, exceeding the previous record of US$9.19 1/2, and closed up 16 1/2 cents at US$9.19 1/2.

 

Minneapolis Grain Exchange December wheat surged to a new high of US$8.93 before closing up 18 1/4 cents at US$8.84 1/4. MGE March wheat soared to a record high of US$8.95 before closing up 15 cents at US$8.88 1/4. The previous all-time high at the MGE was US$8.86.

 

Prices climbed on bigger-than-expected weekly export sales and ideas that demand will remain strong amid shrinking global supplies, traders said. A weak U.S. dollar offered further support to the U.S. grain markets, they said.

 

"The importers are still in a panic mode," said John Kleist, analyst with Kleist Ag Consulting. "There's no question about it."

 

The U.S. Department of Agriculture said weekly export sales for the week ended Sept. 20 totaled 1.56 million metric tonnes, including wheat for delivery in 2007-08 and 2008-09. Trade expectations were for total sales of 700,000 tonnes to 1.4 million tonnes.

 

Export sales for delivery in 2007-08 were 1.51 million tonnes, 5% over the previous week and 10% above the prior four-week average. Major buyers included Iraq, which took 700,000 tonnes; Algeria, which bought 148,600 tonnes; and Japan, which bought 115,000 tonnes.

 

Several tenders also continue to hang over the markets, traders said. Iraq, Pakistan and Jordan issued tenders to buy wheat earlier this week.

 

Morocco's state wheat buyer, the Office National Interprofessionnel des Cereales et des Legumineuses, said it bought 158,000 metric tonnes of optional-origin soft wheat. Morocco awarded licenses to traders to buy the wheat in a tender that closed Tuesday, the agency said.

 

The steady pace of demand for U.S. wheat is accompanied by shrinking world production potential, which is bullish, an analyst said. The International Grains Council pegged 2007-08 world wheat production at 601.4 million tonnes, down 5.6 million from its August projection.

 

IGC dropped its forecast for Australia's wheat output by 9.0 million tonnes to 13.5 million, below the 15.5 million-tonne estimate released last week by the Australian Bureau of Agricultural and Resource Economics. The fact that Australia's crop continues to shrink due to extreme dryness only means more export demand for the U.S., an analyst said.

 

There was a report that South Australia on Wednesday received some "crop-stabilizing showers" of up to 3/4 inch, while a few sprinkles fell in Victoria, according to DTN Meteorlogix. However, the moisture does not end Australia's drought problems, although it is credited with keeping further crop damage from developing in select areas, the private weather firm said.

 

More rain is still needed in Australia's wheat belt but little significant moisture is in sight, Meteorlogix said. The firm's forecast calls for more light showers in Victoria, followed by mostly dry conditions from Saturday through Thursday.

 

Commodity funds bought an estimated 4,000 contracts at the CBOT. In pit trades, FC Stonnee bought 500 December.

 

 

Kansas City Board of Trade

 

CBOT May wheat and KCBT May wheat temporarily traded limit up, or 30 cents higher, on the brisk pace of export business, traders said.

 

The USDA on Thursday announced private export sales of 232,000 metric tonnes of hard red winter wheat for delivery to unknown destinations in the 2007-08 marketing year. The wheat marketing year began June 1.

 

HRW wheat is traded at the KCBT, but the sale lifted values at all three exchanges, floor traders said. HRW wheat also made up a big chunk of the weekly export business, which was supportive to the market, a KCBT trader said.

 

Of 2007-08 weekly U.S. wheat export sales, HRW wheat sales were 972,500 metric tonnes, while soft red winter wheat sales were 900 tonnes, according to the USDA. White wheat sales were 179,900 tonnes, while hard red spring sales were 314,800 tonnes and durum wheat sales were 45,700 tonnes.

 

 

Minneapolis Grain Exchange

 

Wheat futures had strong follow-through momentum after setting all-time highs Wednesday and closing at or near limit up in front-month contracts, an MGE floor trader said. It is almost impossible to call a market top because the trade is in uncharted territory and there is little technical resistance, he said.

 

The USDA is slated to release Friday updated estimates on 2007-08 U.S. wheat production and quarterly grain stocks as of Sept. 1. The estimates, in the agency's September small grains report, are not expected to move the trade's focus from overseas demand and dwindling world supplies, he said.

 

The report is due at 8:30 a.m. EDT (1230 GMT).