US Wheat Review on Monday: Gains for third day as soy surge

 

 

Wheat futures on the Chicago Board of Trade rose for the third consecutive day Monday and reached the highest level in a week as soy rallied and the U.S. dollar eroded.

 

March soft red winter wheat rose 6 cents to US$5.43 1/2 a bushel, the highest closing price since US$5.48 Dec. 7. The contract sank as low as US$5.31 1/2 in overnight trading.

 

Other wheat markets also gained. March hard red winter wheat in Kansas City rose 6 1/2 cents to US$5.34 a bushel, while March hard red spring wheat in Minneapolis gained 5 1/4 cents to US$5.47 3/4.

 

Lacking fresh news, wheat traders keyed off other markets, analysts said. CBOT soy surged on strong demand from China and other foreign buyers, spurring spillover buying in other markets. January soy surged 20 cents, or almost 2%.

 

Longer-term, the late U.S. corn and soy harvest may lead to reduced wheat supplies, said Jason Britt, president of Central States Commodities, Inc., Kansas City, Mo. That's because many farmers who'd typically have sowed soft red winter wheat this time of year won't be able to get that crop planted in time.

 

"Down the road, you could see the balance sheet tighten" for wheat supplies, Britt said.

 

Total U.S. wheat plantings will fall to an estimated 59.1 million acres in 2009-10 from 63.2 million acres the previous year, according to a U.S. Department of Agriculture report last week.

 

The ongoing slump in the U.S. dollar also contributed to support for wheat prices, analysts said. A weak dollar makes U.S. grains cheaper for foreign buyers.

 

Near midday, the euro strengthened to US$1.4645 from US$1.4621 late Friday, as a last-minute bailout calmed fears about Dubai's credit crisis.

 

The broader supply and demand picture for wheat remained bearish, analysts said. Global wheat stocks are projected at the highest level in eight years, while U.S. wheat exports are heading for a seven-year low, according to government estimates.

 

Even with a weak dollar, U.S. wheat looks pricey compared to its foreign competition, analysts said.

 

"We keep thinking that the weak dollar will pump up business" for the U.S., Britt said. "But there's not a whole lot to get excited about fundamentally. Supplies on wheat are pretty ample."

 

U.S. wheat inspected for export totaled 13.03 million bushels for the week ended Dec. 10, down from 13.42 million bushels the previous week, according to a USDA report Monday. The latest weekly figure was at the low end of trader expectations.

 

So far this marketing year, wheat export inspections totaling 454.4 million bushels were down 29% from 639.1 million bushels for the same period during the previous marketing year.

 

"It's disappointing to the market that we're not seeing an uptick in demand," Britt said. "You'd think we'd be more competitive on the world market."

 

Speculative funds bought an estimated 3,000 wheat contracts Monday, CBOT floor sources said.