April 26, 2007

 

US Wheat Review on Wednesday: Soars on speculative buying, world supply fears

 

 

U.S. wheat futures surged higher Wednesday, with Chicago wheat the upside leader, as speculative fund buying energized the market amid fears of tightening world supplies.

 

July CBOT wheat ended 23 cents higher at US$5.20 1/2, July KCBT wheat settled 15 1/2 cents higher at US$5.12 3/4, and July MGE wheat finished 17 1/4 cents higher at US$5.33.

 

Speculative fund buying amplified the gains in wheat Wednesday, but the market's fundamentals were the supportive force that sent prices briefly racing to limit-up levels, said Tanner Ehmke, market analyst with AgResource Co. in Chicago.

 

A tightening world balance sheet served as the catalyst for speculative buying, with anxiety raised amid dryness issues for wheat crops in Europe and Australia; smaller acreage outlooks for Canadian wheat; and lingering worries over U.S. winter wheat production losses from freeze damage, Ehmke said.

 

Nearby CBOT wheat futures briefly catapulted to their upper daily trading limits, as funds bought Chicago wheat with an additional push from bullish technical momentum in the absence of a sizable interest in selling, traders said. Fund buying at the CBOT was estimated at 9,000 contracts.

 

The market came to a realization that things are not all right in world wheat markets, with drought talk in Europe generating strength, as French and London wheat each rallied to new contract highs Wednesday, said Jack Scoville, analyst with the Price Futures Group in Chicago.

 

Borrowed momentum from rallying corn futures was a spark for the market, as corn surged on worries over planting delays in the U.S. Midwest, traders added.

 

Meanwhile, the DTN Meteorlogix Weather Forecasts said rainfall chances are increasing for South Australia, Victoria, much of New South Wales and into southern Queensland provinces during the next three to five days. Rainfall is now pegged at up to three-quarters of an inch. While this will not solve the chronic soil moisture problems of the last year, it is a decent event for moisture ahead of winter wheat planting, and should give the top few inches of soil a good dose of moisture.

 

In CBOT pit trades, Calyon Financial bought 500 July, Fimat bought 600 July, Man Financial bought 2,500 July and 1,000 December, UBS Securities bought 400 July. Sellers were scattered among various commission houses.

 

 

KANSAS CITY BOARD OF TRADE

 

KCBT wheat futures rallied on speculative buying in very active trade, analysts said.

 

Limit-up price moves in Chicago wheat and corn futures spilled over to attract fund buying, with the market propelled higher in fast market dealings for most of the session, a KCBT floor broker said. The realization of tightening supply outlooks served as fundamental justification for the rally, he added.

 

Speculative fund buying was estimated at 3,000 contracts.

 

 

MINNEAPOLIS GRAIN EXCHANGE

 

MGE wheat futures ended higher in step with Chicago and Kansas City wheat.

 

The market followed the lead of Chicago wheat, with buy stops triggered above the US$5.30 level basis the July contract, a trader said. The stops uncovered fund buying, but the upside was limited by good country selling surfacing on the rally, he added.

 

Speculative fund buying was estimated at 1,000 contracts.

 

Otherwise, spreads tightened up with September/December trading between 8 1/2 and 9 cents. Intermarket players were quiet, but concerns over smaller Canadian spring wheat acres remained an underpinning theme, analysts added.