November 29, 2007
US Wheat Review on Wednesday: Soars limit up on Argentina, tightness
U.S. wheat futures soared limit up Wednesday as Argentina stirred up fears about global tightness by announcing a suspension of wheat export registrations.
Chicago Board of Trade March wheat closed limit up, 30 cents higher, at US$8.81 3/4 a bushel, the contract's highest close since Oct. 22. The contract ended trading synthetically about 5 cents higher, a floor trader said.
Kansas City Board of Trade March wheat settled 30 cents higher at US$8.95 1/2, the contract's highest close since Oct. 5. Minneapolis Grain Exchange March wheat ended 29 3/4 cents higher at US$9.21 1/4, the contract's highest close since Oct. 1.
Prices climbed after Argentina said it had closed its wheat export registry for five working days while the government studies the damage to the new crop from recent frosts. Argentina is expected to have a solid crop, and the suspension renewed fears about low world wheat stocks, an analyst said.
"When you take away a country out of the world situation that you were hoping to get a little more inventory out of, it excites" the market, said Larry Glenn, owner of Glenn Commodities. "You tightened up supply a little more, in the market's mind at least."
As of Nov. 26, Argentine exporters had declared almost 6.5 million metric tonnes of 2007-08 wheat for export, according to the Agriculture Secretariat. However, exporters flooded the registry with additional export declarations Tuesday, bringing the total to about 7 million tonnes, according to local press reports.
About 10 million metric tonnes of wheat are expected to be available for export from the new crop, according to analysts. The Agriculture secretary opened the wheat export registry two weeks ago.
Gains on news about Argentina triggered technical buying that accelerated gains, traders said. CBOT December and May wheat also finished limit up.
However, there is already sentiment that the rally was overdone. Some analysts and traders said the temporary shutdown didn't justify the limit-up moves.
"Like always, we overdo things," an analyst said of the volatile wheat market. "If we were stacking up demand, I could see that" justifying the strong gains.
The demand front was quiet Wednesday, although India said Monday is was tendering for wheat. There is also chatter that Pakistan may buy soon, an analyst said.
The U.S. Department of Agriculture is slated to release a weekly export sales report at 8:30 a.m. EST Thursday. Analysts expect sales for the week ended Nov. 22 to total 300,000 tonnes to 550,000 tonnes.
Kansas City Board of Trade
KCBT wheat futures followed CBOT wheat higher, a KCBT floor trader said. The news about Argentina was supportive, but it didn't seem bullish enough to push prices limit up, he said.
Buy stops were triggered as futures prices climbed during the day session, the trader said. It didn't seem as though KCBT March wheat was really trading synthetically higher after the contract hit limit up, he said.
"No one was really talking about our trading synthetic," the trader said. "I don't think anybody really got too excited about synthetics."
Concerns about persistent dryness in hard red winter wheat areas of the U.S. Plains added to the bullish tonnee, an analyst said. The central and southern Plains are still dry and likely to remain that way until Friday, DTN Meteorlogix said.
For this weekend, the private weather firm forecasts up to half an inch of precipitation in northern and eastern areas. The arid southwest will be drier, as a tenth of an inch or less is expected, Meteorlogix said.
Minneapolis Grain Exchange
MGE also was a follower of CBOT wheat, a floor trader said. MGE March wheat temporarily traded 30 cents higher but finished just below limit up, while MGE May wheat closed 30 cents higher.
"KC and Minneapolis were just gracious guests" of the CBOT in the rally, the floor trader said. Along with the Argentina news, technical buying helped carrying the market higher, he said.
