October 14, 2006

 

US Wheat Review on Friday: Prices higher on low supplies, egypt buy

 

 

U.S. wheat futures Friday ended higher with fund buying and ongoing global supply concerns supporting prices, sources said.

 

December Chicago Board of Trade wheat ended 10 cents higher at US$5.25 1/2 a bushel, December Kansas City Board of Trade wheat settled 10 1/4 cents higher at US$5.43, and December Minneapolis Grain Exchange finished up 6 cents at US$5.21 3/4.

 

The gains followed a negative close Thursday, which sources said was a technical correction to rallies earlier in the week.

 

"We have extremely tight world wheat stocks," said Doug Houghtonne, an analyst with The Brock Report.

 

Low production in Australia, which has suffered from an extreme drought, still dominated supply concerns, traders said.

 

Rumors have been circulating in global grain markets that AWB Ltd., which has an export monopoly on Australia's wheat, has been sourcing non-Australian wheat. An AWB spokesman declined to comment directly on the rumors but said the company has an international trading business that sells grains from non-Australian origins into international markets.

 

DTN Meteorlogix forecasts some light rain in South Australia and Victoria, and also in New South Wales and Queensland early next week. Little rainfall is seen for West Australia.

 

"At some point, you'd think that all the Australian markets would be factored in," Houghtonne said. "Everybody's just in a state of panic right now."

 

Egypt, meanwhile, bought 300,000 metric tonnes of wheat, with 120,000 tonnes provided by France and 60,000 tonnes of soft white wheat from the U.S.

 

Analysts said the size of the U.S. sale was disappointing but still boosted prices.

 

"When world wheat stocks are so tight, any demand is supportive," Houghtonne said.

 

Traders said funds buying also helped boost prices. In CBOT pit trades, funds bought 3,000. One analyst said funds bought 16,000-17,000 for the week through Thursday.

 

"The funds have been big buyers in Chicago," he said.

 

Concerns that Argentina will limit wheat exports also played into supply concerns, a CBOT floor source said. Wheat wasn't traded at Argentina's local market Friday as speculation grew that the government will limit exports, analysts said.

 

In other export news, the U.S. Department of Agriculture on Friday released export sales figures for the week ending Oct. 5 that showed net sales of 692,300 million tonnes, a marketing-year high. Iraq's purchase of 300,000 tonnes of hard red winter wheat made up the bulk of the weekly sale total.

 

 

Kansas City Board of Trade

 

A KCBT floor source said the Egyptian purchase gave the market momentum through the day.

 

"I guess that is more likely than anything why we stayed strong," he said about the news. "We thought this thing would run out of steam."

 

The source said it was not a high volume day and there were no major players. There was some profit taking before the weekend, he said.

 

 

Minneapolis Grain Exchange

 

A MGE floor source said the Egyptian purchase and USDA export sales figures boosted the market.

 

"The traders didn't need any more of any excuse to make it move higher," he said.

 

The floor source also said there was profit taking shortly before the closing bell.