December 5, 2007

 

US Wheat Review on Tuesday: Rallies on export demand

 

 

Strong export demand for wheat lifted futures prices at U.S. exchanges Tuesday as the price uptrend for the grain remains intact, analysts said.

 

Most active March wheat at the Chicago Board of Trade rose 17 1/4 cents a bushel to US$8.94, while spot December gained 20 cents to US$8.75.

 

Kansas City Board of Trade March wheat rose 14 cents to US$9.13 and December gained 16 cents to US$9.14 1/2.

 

Minneapolis Grain Exchange March wheat rallied 17 1/4 cents to US$9.51 1/4 and December climbed 18 cents to US$9.78 a bushel.

 

Export business surfaced overnight to buoy wheat from the open. "There were a bunch of singular, positive events going into this session," said John Kleist of Kleist Ag Consulting.

 

Kleist said Japan's tender for wheat, Jordan's purchase of Syrian wheat, and Turkey's and India's interest in buying wheat underpinned prices. On the supply side, Russia's agricultural minister and farm lobby is proposing a halt of their wheat exports when shipments reach 12.5 million metric tonnes, which could happen as early as mid-January. Also, Argentina decided to keep the ban on registering new wheat export business for another 15 days while the government checks into the health of the newly planted crop.

 

Victor Lespinasse, grain analyst at Illinois Grain, said he was surprised that wheat futures acted as strongly as they did. "It's amazing strength. I thought a lot of this was already worked into the market," he said. "The market acts super."

 

Traders also noted speculative buying in wheat, which several said was almost secondary to the bullish fundamental news in the market. Funds bought about 5,000 contracts of CBOT wheat.

 

The gains in wheat came despite some bearish news - forecasts for rains in the parched areas of the southwestern winter wheat belt and a higher estimate for Australia's drought-hit wheat crop.

 

"The market ignored the bearish news and was going with the bullish news," Lespinasse said.

 

Tuesday's firm close across the three markets suggests wheat futures could continue their upswing, analysts said, as momentum is higher. Notably, after the markets closed Egypt's GASC came in with a tender for wheat, which will likely add to the bullish fervor among importers. GASC is shopping for at least 55,000 to 60,000 metric tonnes of wheat for shipment Dec. 25 to Jan. 10, on a free-on-board basis.

 

The Egyptians are seeking to buy 55,000 to 60,000 tonnes of U.S. hard red winter wheat, U.S. soft red wheat, U.S. soft white wheat, French milling wheat, Argentine wheat, Kazakhstan wheat, or Canadian soft wheat. GASC is also looking for 30,000 to 60,000 tonnes of Russian, German, U.K. or Syrian wheat. Bids for the tender are due Wednesday at 1200 GMT. Egypt is known to tender for small quantities but often buys much more than originally requested.

 

At the CBOT, standout buyers included USA Trading buying 300 March, Rosenthal buying 200 March, and Tenco buying 200 July.

 

 

Kansas City Board of Trade

 

Prices ended near session highs. Near the close, December KCBT wheat traded in "fast" market conditions as prices returned the session's highs. Kleist said part of the gains in KCBT wheat - and MGE - could stem from the fact much of the importer interest for wheat is for the hard red varieties, both traded at those exchanges.

 

Also supportive is that there have been no delivery notices for KCBT December wheat.

 

 

Minneapolis Grain Exchange

 

Tuesday's rally allowed the thinly traded MGE December wheat to set a fresh all-time high, traders noted. Here, too, there have been no deliveries against the December contract, a supportive feature.

 

"The commercials are afraid to give up ownership of those contracts," an analyst said.