October 19, 2007
US Wheat Review on Thursday: Up on spillover, weak US dollar, demand
U.S. wheat futures closed higher Thursday on spillover strength from neighboring markets and weakness in the U.S. dollar, traders said.
A sale of U.S. wheat to Egypt was another friendly factor, analysts added.
Chicago Board of Trade December wheat rose 5 cents to US$8.25 1/2 per bushel. Kansas City Board of Trade December wheat settled 6 1/4 cents higher at US$8.39, and Minneapolis Grain Exchange December wheat climbed 9 cents to US$8.39 3/4.
Spillover strength from CBOT corn and soybeans helped wheat futures advance during the day session, traders said. A weaker greenback also was supportive for the CBOT grains as it gives importers more buying power, they said.
Egypt's General Authority for Supply Commodities said it bought 70,000 metric tonnes of U.S. soft red wheat and 80,000 tonnes of Russian wheat. The U.S. sale was supportive because the trade had expected GASC to buy all Russian wheat, traders said.
A breakdown of the bids for the Egyptian tender also showed U.S. wheat was becoming more competitive on the world market, a CBOT floor trader said. Weekly U.S. wheat export sales data issued Thursday also were within trade expectations.
The USDA said sales for the week ended Oct. 11 were 1.09 million metric tonnes, including sales for delivery in 2007-08 and 2008-09. Analysts had expected to see total sales of 800,000 tonnes to 1.65 million tonnes.
Still, there is uncertainty about whether demand for U.S. wheat will pick up again after a recent lull, said Jerry Gidel, analyst with North American Risk Management Services.
The U.S. sold wheat at a strong pace early in the marketing year, which began June 1, and there are ideas that importers front-loaded their purchases. As of Oct. 11, 19 weeks into the marketing year, total U.S. export commitments were 25.892 million tonnes, 83% of the USDA's target for the year.
"People are disbelieving a little bit of the pick-up in demand for the U.S.," Gidel said.
One analyst noted he was not particularly impressed with the amount of wheat Egypt bought from the U.S. It seems as though the trade is "a little jaded" regarding export demand after seeing rapid sales early in the marketing year, he said.
"It wasn't something to bowl anybody over," the analyst said about the Egyptian purchase.
Looking at technical charts, it is "encouraging" for wheat bulls that CBOT December wheat is holding above its 50-day moving average, an analyst said. The technical support indicates there may be a recovery in the markets early next week after weakness earlier this week, he said.
Commodity funds bought an estimate 2,000 contracts at the CBOT.
Kansas City Board of Trade
KCBT wheat futures felt spillover support from CBOT corn and soybeans, a floor trader said. Floor trading was quiet, and volume was light, he said.
Sales of hard red winter wheat, traded at the KCBT, made up the largest portion of weekly wheat export sales. However, it was "a little disappointing" that weekly sales were at the low end of estimates, the trader said.
Of the export business for delivery in 2007-08, HRW wheat sales totaled 357,700 tonnes, and sales of SRW wheat were 110,300 tonnes, according to the USDA. Sales of hard red spring wheat were 248,800 tonnes, while white winter wheat sales were 216,600 tonnes and durum sales were 51,100 tonnes.
Sales for delivery in 2008-09 included 50,000 tonnes of HRW wheat, 12,000 tonnes of SRW wheat, 32,000 tonnes of HRS spring wheat, and 13,000 tonnes of white winter wheat, the USDA said.
Minneapolis Grain Exchange
MGE wheat futures led the upside. The market largely followed action at the CBOT, a MGE floor trader said. Floor activity was thin, although there is still solid demand for HRS wheat, traded at the MGE, he said.
There are not any major world weather problems around to grab the market's attention, the trader said. In the Ukraine, for example, planting is reportedly going well, which is bearish for U.S. wheat futures, he said.
