November 28, 2007
US Wheat Review on Tuesday: Rises amid crop concerns, export news
Concerns about tight supplies and unfavorable dryness in parts of the U.S. Plains boosted U.S. wheat futures Tuesday, analysts said.
Chicago Board of Trade March wheat soared 17 3/4 cents to US$8.51 3/4 per bushel. Kansas City Board of Trade March wheat jumped 11 1/4 cents to US$8.65 1/2, and Minneapolis Grain Exchange March wheat climbed 10 1/2 cents to US$8.91 1/2.
There was support during the day session from news that Morocco said it had bought 316,000 metric tonnes of soft wheat for December delivery, completing business announced earlier this month, analysts said. The purchases were made through local importers and much of the wheat was already in the country, traders said.
India's state-run trading company, PEC Ltd., Monday issued a tender to import an unspecified volume of wheat. The Indian tender closes Dec. 3, with bids valid until Dec. 8, and the wheat should be delivered by March 10.
Morocco's announcement and India's tender are seen as bullish because they take supplies off the world market in the near term, when supplies are already tight, analysts said. Bulls continued to feed on the news of India's tender, "even though it was no big surprise," said Tom Leffler, owner of Leffler Commodities.
"We saw a little bit of export business in the news," Leffler said.
Moving forward, the trade remains eager to see the U.S. Department of Agriculture's weekly export sales report, an analyst said. There are some hopes demand will continue to pick up after prices fell sharply from all-time highs set earlier this fall, he said.
Deteriorating condition ratings for the U.S. winter wheat crop also were seen as supportive to wheat futures, traders said. The USDA late Monday said 44% of the crop was in good-to-excellent condition as of Sunday, down one percentage point from the previous week and nine percentage points from last year.
In Texas, 53% of the crop was rated very poor to poor, up from 47% a week earlier. The USDA said 11% of the crop was good to excellent, down from 16% the previous week.
"You've got also to respect the fact that we saw the crop condition drop," Leffler said. "I think you get a little bit concerned when you look at Texas. I think that's going to get some people's interest."
Short-covering and some wheat/corn spreading also boosted prices, analysts said. Shorts wanted to exit the market before the December contract's first notice day Friday, they said. Commodity funds bought an estimated 2,000 contracts at the CBOT.
Kansas City Board of Trade
Persistent dryness in hard red winter wheat areas of the U.S. Plains was blamed for the decline in condition ratings. HRW wheat is traded at the KCBT.
Precipitation in the central and southern Plains will be "minimal or nonexistent" until Saturday, DTN Meteorlogix said in a forecast. A weather system developing over the Rockies may produce some snow or rain, Meteorlogix said, "but it won't be enough to make much difference to that parched wheat-growing region."
In other news, the December/March spread trade was active at the KCBT, a floor trader said. There are ideas that deliveries of the December contract won't be heavy on first notice day if the spread stays around 15 cents, he said. KCBT December wheat closed up 13 1/4 cents at US$8.52 1/4, with the December/March spread at 13 1/4 cents.
Minneapolis Grain Exchange
MGE wheat futures gained amid concerns about tight spring wheat supplies and shrinking world supplies, a floor trader said.
There are also lingering concerns about the extent of damage to Argentina's wheat crop after a recent frost, an analyst said. The scope of the damage may not be known until the harvest, he said.
Wheat futures rose despite weakness in the neighboring CBOT corn and soybean markets and in outside markets like crude oil. Wheat can act independently because it does not have a relationship with crude oil as corn does through ethanol and soybeans do through biodiesel, said Vic Lespinasse, analyst for Illinois Grain.
