June 12, 2008

 

US Wheat Review on Wednesday: Climbs 60-cent limit on record corn rally

 

 

U.S. wheat futures surged the daily, exchange-imposed limit of 60 cents Wednesday on spillover support from new record highs in Chicago Board of Trade corn and on short-covering.

 

Chicago Board of Trade July wheat soared 60 cents to US$8.69 per bushel. The contract was synthetically trading about 11 cents higher at the close, a floor trader said.

 

Kansas City Board of Trade July wheat jumped 60 cents to US$9.06 1/2 and was synthetically trading 4 1/2 to 8 cents above the limit at the close, traders said. Minneapolis Grain Exchange July wheat rose 60 cents to US$10.46 but did not trade synthetically higher.

 

The daily CBOT, KCBT and MGE wheat limit temporarily expands to 90 cents Thursday after the limit-up close.

 

Wheat climbed as CBOT corn reached its daily 30-cent limit on predictions that excessive rains in the U.S. corn belt will lower yields and cause some farmers to abandon acres. Nearby CBOT July corn traded above US$7 for the first time and ended at an all-time high of US$7.03 1/4.

 

"It's hard to justify any other reason for this" wheat rally aside from the gains in corn," said Louise Gartner, analyst for Spectrum Commodities.

 

Wheat will continue to watch corn for direction moving forward, as both grains are used for feed. It will be difficult for wheat to pull back while corn is surging, Gartner said.

 

Wheat feed use is expected to increase in 2008-09 due to the soaring price of corn. The U.S. Department of Agriculture Tuesday raised its estimate for wheat feed and residual use by 25 million bushels to 255 million bushels, up from 60 million in 2007-08.

 

Commodity funds bought at least 5,000 contracts at the CBOT. The market found technical strength after CBOT July wheat topped its 50-day moving average around US$8.31 1/2, a trader said.

 

 

Kansas City Board of Trade

 

KCBT wheat futures followed CBOT corn higher. Strong gains in crude oil added support, a KCBT floor trader said.

 

The market is jittery about harvest delays in Oklahoma and Kansas due to wet weather, as heavy rains in the Plains at harvest time cut yields last year. Periodic thunderstorms will hit parts of Nebraska, Kansas and possibly Oklahoma during the next five days, with some areas in line for as much as 1.5 inches of moisture, according to DTN Meteorlogix.

 

In other news, the USDA said 100,000 tonnes of U.S. hard red winter wheat were sold to Nigeria for delivery in the 2008-09 marketing year. The agency is slated to issue its weekly export-sales report at 8:30 a.m. EDT Thursday, with expectations for wheat business as of June 5 ranging from 100,000 to 250,000 tonnes.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures "absolutely" took their direction from CBOT corn during the day session, a floor trader said. Nearby MGE July wheat did not trade synthetically higher, he said.

 

"There's nothing that would drive us this high" aside from the surge in corn, the trader said.