October 12, 2007

 

US Wheat Review on Thursday: Climbs limit up on positioning, demand

 

 

U.S. wheat futures closed at or near limit up Thursday on bullishness about export demand and positioning ahead of a government crop report, traders and analysts said.

 

Chicago Board of Trade December wheat finished limit up, 30 cents higher, at US$8.83 per bushel. Kansas City Board of Trade December soared 29 3/4 cents to US$8.86, and Minneapolis Grain Exchange December wheat settled 30 cents higher at US$8.90 3/4.

 

CBOT December wheat was trading synthetically around US$8.84 at the close, a veteran CBOT floor trader said.

 

Although prices are already at lofty levels, the markets rallied hard late in the session as traders positioned themselves going into the release of the U.S. Department of Agriculture's October supply and demand report, analysts said. The report, due at 8:30 a.m. EDT, is expected to show a drop in U.S. and world wheat ending stocks.

 

"Wheat's like the Energizer Bunny," the veteran CBOT trade said. "It keeps going and going."

 

U.S. carryout is expected to fall due to the steady pace of export demand, analysts said. Smaller U.S. supplies and a cut in Australia's crop due to drought should also tighten global stocks, they said.

 

The average of analysts' pre-report estimates for 2007-08 U.S. wheat ending stocks is 304 million bushels, down from the USDA's September estimate of 362 million, according to a Dow Jones Newswires survey of 13 analysts. Last year, ending stocks were 456 million bushels.

 

The trade is keen to see where the USDA pegs production in the countries like Russia and Kazakhstan, which have seen their production forecasts grow, said Louise Gartner, analyst for Spectrum Commodities. Improved outputs from the countries could indicate the U.S. will see more competition for exports.

 

The supply/demand report will set the tonnee for Friday's session, the veteran CBOT trader said.

 

In demand news, Morocco's state wheat buyer, the Office National Interprofessional des Cereales et des Legumineuses, said it was tendering to buy 500,000 metric tonnes of soft milling wheat of any origin. Traders expect Morocco will buy French wheat, which helped boost E.U. wheat futures.

 

Strength in E.U. wheat spilled over into the U.S. markets, Gartner said. The rally in U.S. wheat is a turnaround from the beginning of the week, when the markets were on the defensive.

 

"Weak European prices had been part of the drag on U.S. prices," Gartner said. Europe's rally "takes some of the pressure off our prices."

 

The weaker U.S. dollar gave wheat futures an additional boost as it means foreign importers have more buying power, analysts said. Stronger outside markets also lent support, traders said.

 

U.K. farmers harvested 13.4 million metric tonnes of wheat in 2007, a drop of 9% on the year, according to provisional estimates issued by the Department for Environment, Food and Rural Affairs. The harvest results were below previous data compiled by Defra and the Home Grown Cereals Authority, which had put the U.K. wheat crop at a range of 13.5 million-14.0 million tonnes.

 

Looking at the weather in southern Illinois' soft red winter wheat region, conditions look as though they will remain unfavorably dry, DTN Meteorlogix said. SRW wheat is traded at the CBOT.

 

 

Kansas City Board of Trade

 

KCBT December and March wheat touched limit up before trimming gains slightly at the close. Spillover buying from the CBOT rally provided support to KCBT wheat, a KCBT floor trader said.

 

Demand for hard red winter wheat, traded at the KCBT, still looks strong, the trader said. The USDA said Thursday that Iraq bought 100,000 tonnes of HRW wheat for delivery in the 2007-08 marketing year. The agency said Wednesday that Iraq had bought 300,000 tonnes of HRW.

 

In the U.S. central and southern Plains, conditions have been favorable for planting winter wheat, but rain will disrupt seeding Sunday night into Monday, Meteorlogix said. Despite any delays the rain may cause, it will be welcome for the boost in soil moisture, the private weather firm said.

 

 

Minneapolis Grain Exchange

 

MGE December, March and July wheat closed limit up on position evening ahead of the USDA report and on spillover buying. The CBOT rally and firmer E.U. wheat market were seen as supportive, a MGE floor trader said.

 

In the wheat areas of Ukraine and Russia, rain is possible during the five- to seven-day period, associated with a slow-moving upper-level disturbance, Meteorlogix said. Rain may delay fieldwork and planting, but the moisture is needed to replenish soil moisture after this year's drought.