December 15, 2007

 

US Wheat Review on Friday: Ends mixed amid late bull spreading

 

 

U.S. wheat futures closed mixed Friday as some nearby contracts soared to all-time highs amid late technical buying and bull spreading, analysts said.

 

The markets had been mostly weaker earlier in the session amid pressure from profit-taking, a firmer greenback and forecasts for more precipitation in the U.S. Plains, traders said.

 

Chicago Board of Trade March wheat roared 26 cents higher to US$9.79 1/2 per bushel, up 58 cents on the week. Kansas City Board of Trade March wheat finished 16 1/4 cents higher at US$9.99 1/4, up 49 1/4 cents on the week. Minneapolis Grain Exchange March wheat surged 26 1/4 cents to US$10.75 3/4, up 73 1/4 cents on the week.

 

Heading into the close, CBOT March wheat jumped sharply and set a new high of US$9.81 per bushel in open outcry trading. There was no fresh fundamental news out to support the rally, but technical buying and bull spreading came in to push prices higher, a trader said.

 

Bull spreading lifted old-crop contracts, while new-crop CBOT July wheat tumbled 19 1/2 cents to US$7.88. Forecasts for more precipitation in the U.S. Plains, seen as beneficial for the developing wheat crop, pressed on the deferred months, analysts said.

 

Earlier weakness came as the markets pulled back after recent rallies, traders said. There were "air pockets" in the market that made it easier to push prices around, a trader said.

 

A stronger U.S. dollar was bearish for wheat because it gives foreign countries less buying power if they want to import U.S. products. Egypt's state-owned General Authority for Supply Commodities canceled a tender to buy at least 55,000 to 60,000 metric tonnes of wheat for shipment Jan. 5-20.

 

The cancellation was seen as a bearish influence on the market, said Jim Bower, owner of Bower Trading. GASC said it cancelled the tender because prices were too high.

 

However, the news wasn't particularly troublesome for bulls because Egypt will still have to buy the wheat to meet its needs, traders said. They noted the tender was for delivery in the near term.

 

 

Kansas City Board of Trade

 

Forecasts for more precipitation in the Plains and reports of expanded acreage were bearish for new-crop wheat, a KCBT floor trader said. KCBT July wheat fell 17 1/4 cents to US$8.14 3/4.

 

A storm system moving out of the Colorado Plateau region will be a snow producer for the western, central and southern Plains, DTN Meteorlogix said. A mix of snow, ice and rain is also expected in the eastern and southern Midwest through the Delta on Saturday and Sunday, the private weather firm said.

 

"Plains winter wheat will benefit from this moisture," Meteorlogix said.

 

Significant moisture that hit the Plains during a winter storm earlier in the week "really helped the winter wheat," Bower said. Weather patterns will help give the markets direction next week, he said.

 

Private analytical firm Informa Economics on Friday pegged 2008-09 U.S. winter wheat plantings at 48.7 million acres, traders said. The estimate is up from the 45 million acres of winter wheat planted in 2007-08, according to the U.S. Department of Agriculture.

 

 

Minneapolis Grain Exchange

 

MGE December wheat set a new all-time high of US$11.30 as the contract was expiring, topping the previous high of US$11.15. That is the highest price ever for a wheat future on any U.S. exchange.

 

MGE March wheat set a new contract high of US$10.76, topping the previous intraday high of US$10.67. The market largely followed the CBOT higher toward the end of the session, a MGE floor trader said.

 

MGE has rallied recently amid concerns about tight spring wheat supplies. The USDA this week lowered its estimate for hard spring wheat stocks ending stocks by 5 million bushels to 87 million.

 

Bower said many spring wheat acres in the U.S. Northern Plains have been planted with hard red winter wheat this year. He said he recently returned from giving presentations in Minnesota and South Dakota, where he spoke to hundreds of producers.

 

"They've shifted the spring wheat acres over to hard red winter," Bower said. "I think that was significant."