January 13, 2007

 

US Wheat Review on Friday: Strong gains on spillover corn strength

 

 

U.S. wheat futures Friday touched limit-up in several contracts and finished sharply higher on spillover interest from the neighboring corn market, sources said.

 

Chicago Board of Trade March wheat finished 23 cents higher at US$4.79 1/2 per bushel, Kansas City Board of Trade March wheat closed up 24 cents at US$5.05 1/4, and Minneapolis Grain Exchange March wheat ended 25 cents firmer at US$5.07.

 

CBOT corn futures opened limit up - 20 cents higher - and remained planted there throughout the day session after the U.S. Department of Agriculture released bullish crop reports that lowered estimates for corn production and carryout, sources noted.

 

With corn locked up, traders looking to buy turned to wheat and soybeans, said Dale Durchholz, senior analyst with AgriVisor. Wheat futures prices also have to keep pace somewhat with corn, or wheat risks losing acres to corn in the spring, Durchholz added.

 

Wheat futures hit limit-up - 30 cents higher - in several contracts at CBOT, including March, May and July.

 

"As the corn goes up, the wheat and the beans have to play the game, too," Durchholz said. "In wheat, youve got people talking about the possibility of going out, ripping up the wheat and planting in corn next spring."

 

Looking ahead, wheat futures prices will likely stay strong as long as corn rallies, Durchholz said.

 

Wheat prices "cant go down as long as corn continues to go up, and thats because of this acreage game," he said.

 

Along with its estimates for corn, the USDA also Friday released new estimates for wheat seedings, carryout and quarterly stocks. They were largely seen as neutral for trading, CBOT floor sources said.

 

The USDA pegged U.S. winter wheat seedings at 44.089 million acres, slightly below the average analyst expectation of 44.2 million acres. In a breakdown of the seedings, hard red winter wheat seedings and white winter wheat seedings were below analysts expectations, while soft red winter wheat seedings were modestly above expectations.

 

The higher SRW wheat number was a surprise because wet weather was thought to have discouraged planting of the crop, an analyst noted.

 

The USDAs U.S wheat carryout estimate came in above analysts expectations at 472 million bushels. The USDA pegged quarterly wheat grain stocks at 1.315 billion bushels, matching analysts expectations.

 

The USDA increased its estimate for world wheat carryover from 120.7 million metric tonnes to 121.8 million. World production numbers, however, did not change much.

 

In other bullish news for wheat, the USDA Friday announced private export sales of 100,000 metric tonnes of U.S. hard red winter wheat for delivery to Iraq in the 2006-07 marketing year. The wheat marketing year began June 1.

 

There has been talk among traders this week that Iraq may buy more wheat soon.

 

Funds buying an estimated 7,000 contracts at CBOT helped support the wheat rally, a floor source noted.

 

In pit trades, Fimat bought 1,000 March, and JP Morgan bought 600 March. ADM bought 5,000 May. Tenco and ABN-Amro each sold 500 March.

 

Activity on the CBOTs electronic trading system, e-cbot, halted twice during the day session.

 

Traders reported the first outage around 11:30 a.m. EST. The CBOT said activity on e-cbot resumed at 12:42 p.m. EST. The second outage occurred shortly before the close, traders noted.

 

 

Kansas City Board of Trade

 

KCBT wheat futures ended solidly firmer and hit limit-up in several contracts, including July and December, following the strength in CBOT corn, a floor source said.

 

"Corn was the leader," he said. "Theres no question about it."

 

The USDA estimated seedings for HRW winter wheat, which is traded at KCBT, at 31.9 million acres, slightly below analysts expectations of 32 million. The new estimate did not impact trading much as everyone was focused on corn, he said.

 

 

Minneapolis Grain Exchange

 

MGE wheat contracts were the first to go 30 cents higher during the day session. MGE March, May and July wheat all touched limit up.

 

The market was focused on gains in CBOT corn, a floor source said. There were few sellers during the rally, he noted.