November 7, 2007

 

US Wheat Review on Tuesday: Rises on strength from outside markets

 

 

Stronger outside markets tugged U.S. wheat futures higher Tuesday, with support from ideas that demand may be picking up, traders and analysts said.

 

Chicago Board of Trade December wheat ended up 12 cents at US$7.97 per bushel. Kansas City Board of Trade December wheat rose 10 cents to US$8.22 1/4, and Minneapolis Grain Exchange December wheat soared 19 1/2 cents to US$8.48.

 

Gains in crude oil and metals provided spillover strength to wheat amid broad-based commodity buying, CBOT floor traders said. Commodity funds bought an estimated 3,000 contracts at the CBOT.

 

"Without question, you have to take a look at the outside markets," said Greg Wagner, director of marketing and risk management for Horizon Ag Strategy. "They're exerting profound influence on the grain markets."

 

CBOT corn and soybeans also ended firmer, which added to the bullish atmosphere for wheat, a trader said. The neighboring corn and soybean markets acted like "two strong pillars on either side of wheat," Wagner said.

 

Demand news also was friendly, traders said. State-run Trading Corp. of Pakistan issued a tender to import 300,000 metric tonnes of milling wheat for shipment between December and January, with bids to be submitted Nov. 14. Pakistan also issued another import tender for 20,000 tonnes, which was India specific.

 

The trade expected Pakistan to tender, so the news was partially factored into the markets already, a CBOT trader said. However, it still provided some underlying support because the 300,000-tonne tender would take a large amount of wheat off the world market when supplies are tight, an analyst said.

 

Ukraine, meanwhile, said it would postpone plans to resume grain exports until Dec. 31. The government previously said it would end an export ban Nov. 1.

 

There also continues to be speculation that India, Iraq and Turkey may tender soon for wheat, traders said. An Indian government official said Friday that the state-run MMTC Ltd. might float a tender for 330,000 tonnes of wheat this week.

 

"Anything that's waiting in the wings is going to be construed as friendly," Wagner said about the potential tenders.

 

Liffe's European wheat futures rose Tuesday on fresh demand and gains in the CBOT grain and oilseed complex. The advances helped offset losses posted during the last couple of sessions.

 

Paris January milling wheat rose EUR2.25, or 1%, to end at EUR229/tonne with 882 lots moved. London January feed wheat ended up GBP1.75, or 1.1%, to end at GBP156.25/tonne with 56 contracts traded.

 

 

Kansas City Board of Trade

 

Unfavorable dryness in some hard red winter wheat growing areas of the U.S. Southern Plains is boosting new-crop KCBT July wheat, floor traders said. The markets are nervous after unfavorable weather slashed global production and lowered supplies this year, Wagner said.

 

KCBT July wheat closed up 13 3/4 cents at US$6.99 3/4.

 

"The market's just on a hair trigger," he said. "We're not anywhere near out of the woods. It's going to be a long and laborious process to rebuild stocks, and weather has to cooperate."

 

The USDA's weekly crop progress report, released Monday, said 53% of the U.S. winter wheat crop was in good-to-excellent condition as of Sunday, down two percentage points from the previous week and below last year's rating of 59%. In Kansas, 55% of the crop was rated in good-to-excellent condition, down seven percentage points from last week.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures led the upside amid positioning ahead of the release of the U.S. Department of Agriculture's November supply and demand report, due Friday, a floor trader said. The USDA in September cut its production estimate for spring wheat, traded at the MGE, and that has since helped boost MGE wheat futures in comparison to CBOT wheat, the trader said.

 

Late commercial buying and demand from Taiwan and Japan also supported prices, the MGE trader said. Japan said it was seeking 140,000 metric tonnes of wheat, including 75,000 tonnes from the U.S., in a routine tender to be concluded Thursday.

 

Taiwan is expected to open a tender Wednesday for about 81,400 tonnes of U.S. wheat in two separate shipments, traders said. Shipments will include dark northern spring, white winter, and HRW wheat, they said.