December 6, 2007

 

US Wheat Review on Wednesday: Profit-taking hits markets; minneapolis grain exchange rises late

 

 

Profit-taking and disappointment over the results of an Egyptian tender weighed on U.S. wheat futures Wednesday, although Minneapolis Grain Exchange contracts rose in a late rally.

 

MGE December wheat hit and closed at a new all-time high as commercial buyers came in at the close.

 

Chicago Board of Trade March wheat fell 9 cents to US$8.85 per bushel. Kansas City Board of Trade March wheat slipped 5 cents to US$9.09 1/2, and Minneapolis Grain Exchange March wheat jumped 3 1/2 cents to US$9.54 3/4.

 

Egypt's main wheat buyer, the state-owned General Authority for Supply Commodities, said Wednesday it bought 60,000 metric tonnes of Russian wheat in a tender and none from the U.S. The wheat was purchased at US$337.49/tonne for delivery Dec. 25 to Jan. 10 on a free-on-board basis, an official said.

 

The trigger for weakness during the session "obviously had to be that the Egyptians didn't buy any wheat, except for Russia," said Dave Marshall, an independent marketing advisor and commodities broker. "I think that's what got the ball rolling."

 

It was also bearish that Egypt did not buy more than 60,000 tonnes, traders said. A larger purchase, even if it wasn't of U.S. wheat, would have done more to drain world supplies, which are already tight, they said.

 

Disappointment over the Egyptian tender inspired profit-taking after a hard rally Tuesday, traders said. Commodity funds sold an estimated 5,000 contracts at the CBOT. In CBOT pit trades, MF Global bought 400 March and sold 800 December.

 

Demand from other countries provided underlying support, a CBOT floor trader said.

 

Morocco's state wheat buyer, the Office National Interprofessional des Cereales et des Legumineuses, said Wednesday it was tendering to buy 314,000 metric tonnes of soft milling wheat, of any origin, from importers inside the country. The deadline for bids is Dec. 18, with wheat to be delivered before Jan. 20.

 

Turkey's state grain board Thursday is slated to hold a tender to buy 200,000 metric tonnes of soft wheat, and the results are expected to be released Friday. India's State Trading Corporation, meanwhile, might float a wheat tender by next week, a senior company official said Monday.

 

The U.S. Department of Agriculture is due to release its weekly export sales report Thursday morning. Trade estimates call for wheat sales of 300,000 to 500,000 tonnes.

 

In other news, analytical firm Informa Economics estimated Argentina's 2007-08 wheat crop at 15.0 million metric tonnes versus the USDA's November estimate of a 15.5 million tonnes. Argentina has suspended wheat export registrations as the government studies damage to the new crop from recent frosts.

 

The drop in Informa's estimate was not surprising given that market participants have already talked about damage from the cold snap, a CBOT floor trader said. However, some private estimates have already estimated the frosts caused even greater losses, he said.

 

 

Kansas City Board of Trade

 

The KCBT spent much of the day session giving back Tuesday's strong gains, a KCBT floor trader said. Morocco's tender provided underlying support, but there was little other fresh bullish news out, he said.

 

Traders will continue to monitor forecasts for dry hard red winter wheat areas of the U.S. southern Plains, Marshall said. A lack of rain in the region has been a bullish concern for the markets.

 

Forecasters said the Plains may receive some rain this weekend through early next week. However, compared to Tuesday, the promise of beneficial moisture in the very dry western HRW wheat belt has diminished, DTN Meteorlogix said.

 

T-Storm Weather said some precipitation should occur in the region, particularly from Sunday to Thursday, but that the heaviest totals will likely fall east of most HRW wheat.

 

 

Minneapolis Grain Exchange

 

MGE December wheat hit and closed at a new all-time high of US$9.88, exceeding the previous high of US$9.80. The contract finished up 10 cents in a late rally that was a turnaround from earlier weakness.

 

Commercial buying at the close from MF Global, UBS and Fimat was behind the rally, floor traders said. The gains at MGE helped trim losses at the CBOT and KCBT, they said.

 

There were a "fair amount" of traders buying MGE wheat against CBOT and KCBT wheat, one MGE floor trader said. Another MGE trader says there was some selling of MGE wheat against the CBOT, and "when that dried up, that kind of took an anchor off us."