October 30, 2007

 

US Wheat Review on Monday: Hits limit up in bounce amid export talk

 

 

U.S. wheat futures hit limit up and settled sharply higher Monday as the markets recovered from recent weakness amid rumblings that several countries may issue tenders soon, traders said.

 

Chicago Board of Trade December wheat finished 28 1/2 cents higher at US$8.28 1/2 per bushel. CBOT December and March wheat during the session touched limit up, 30 cents higher, before trimming gains.

 

Kansas City Board of Trade December wheat ended up 26 3/4 cents at US$8.54 1/4, and Minneapolis Grain Exchange December wheat closed up 29 cents at US$8.56.

 

There was talk that India, Iraq and Turkey may all enter the market to buy wheat, although no tenders were confirmed, traders said. The talk is natural following last week's sharp price drop, said Jason Britt, broker and analyst at Central State Commodities.

 

"We're hearing a little talk of sniffing around on some export business," Britt said.

 

But the rally was really due more to a bounce from last week's weakness and to volatility in the markets than to the potential for any export business, said a Pacific Northwest grain broker with export ties. High volatility makes it easier for prices to climb or fall the exchange's daily limit, he said.

 

Even if India takes 1 million metric tonnes of wheat off the world market, the broker said, the trade has "already more than discounted that" because Indian officials said this summer they planned to buy 5 million tonnes. Iraq is an unreliable buyer, he said.

 

As for Turkey, "they definitely have a need to import wheat," the broker said. "But I don't think it's going to be any astronomical 250,000 (tonne) kind of number. It's all going to be Kazakhstan or Russian."

 

Egypt's main wheat buyer, the state-owned General Authority for Supply Commodities, this weekend said it bought 190,000 metric tonnes of Russian wheat in a tender and none from the U.S. Some traders said they saw the news as supportive because it shows there is still demand in the world for wheat after importers bought a fast pace early in the marketing year.

 

Global wheat stocks remain historically tight, Britt noted.

 

Traders will get a better idea of Australian production potential when the Australian Bureau of Agricultural and Resource Economics, or ABARE, releases an unscheduled crop report at 7 p.m. EDT (2300 GMT) Monday. The trade is looking for ABARE to put production at about 11 million to 12 million tonnes, down from its September estimate of 15.5 million, a CBOT floor trader said.

 

Drought has plagued Australia's growing regions, but some areas look to turn unfavorably wet for harvesting this week, according to Cropcast Agricultural Weather. An area extending from southern Queensland to New South Wales is forecast to be "very wet," the private weather firm said.

 

"These rains would be detrimental to the crop, as delays in harvesting are certain and localized lodging damage could occur," Cropcast said.

 

Light rains across South Australia and Western Australia are not expected to cause any significant problems. Next week, harvest conditions should improve from Queensland through New South Wales, Cropcast said.

 

Strength in outside markets, including crude oil, silver and gold, also provided provide carryover strength for the CBOT grains markets, a CBOT floor trader said. Commodity funds bought an estimated 3,000 wheat contracts.

 

In other news, non-commercial speculative funds increased long and short CBOT wheat futures and options positions in the week ended Oct. 23, the Commodity Futures Trading Commission said in a supplemental report. The funds increased long positions by 3,487 lots, short positions by 2,511 lots, and were net short 8,318 contracts, according to the report.

 

 

Kansas City Board of Trade

 

KCBT December wheat hit limit up during the day session.

 

The U.S. Department of Agriculture is slated to release its weekly crop progress report, including updates on winter wheat planting and emergence, at 4 p.m. EDT Monday. The report should also contain the first national condition rating of the season, traders said.

 

"The only thing I'm hearing is that (producers) would like to see a little bit more moisture," Britt said about conditions in the U.S. Plains. "As a whole, I'd say conditions aren't too bad."

 

The DTN Meteorlogix forecast calls for continued weather this week across the central U.S. The first part of November will bring continued dry and generally warm temperatures to the Midwest, Plains and Delta.

 

Some areas of the southwestern Plains that are now turning drier will continue to lose topsoil moisture, Meteorlogix said. The trend bears monitoring during the rest of the fall season, the weather firm said.

 

Speculative funds trimmed long KCBT wheat futures and options positions by 356 lots and cut shorts by 205 lots, the CFTC said in a supplemental report. The funds were net long 31,145 contracts.

 

 

Minneapolis Grain Exchange

 

MGE December wheat hit limit up during the day session.

 

Along with the chatter about potential tender activity, there was talk about disappointing yields in Australia, the trader said. ABARE's updated crop report should help give the trade a better idea of how much Australia will produce and be able to export, he said.

 

Speculative funds increased long MGE wheat futures and options positions by 1,086 lots and cut short positions by 248 lots, the CFTC said. They were net long 12,465 contracts.