June 14, 2008

 

US Wheat Review on Friday: Ends sharply higher in corn-fueled rally

 

 

Technical buying and a rally in Chicago Board of Trade corn futures catapulted U.S. wheat futures sharply higher Friday.

 

CBOT July wheat soared 31 cents to US$8.82 per bushel, up 71 cents on the week. Kansas City Board of Trade July wheat surged 32 cents to US$9.24 1/4, up 77 1/2 cents on the week. Minneapolis Grain Exchange July wheat climbed 28 1/4 cents to US$10.54 1/4, up 27 cents on the week.

 

Wheat felt spillover support from CBOT corn, as corn climbed to another fresh all-time high on worries that excessive wetness in the U.S. Midwest will lower production and cause acreage losses. Corn set record highs each day this week.

 

"It's incredible, but it's also probably justified," said Greg Wagner, analyst for AgResource Company, about the strong gains in corn. "Who knows, once everything gets sorted out, what's going to be left?"

 

The corn-fueled rally carried CBOT July wheat to its highest close since April 18. The contract nearly reached US$9 during the day, with a session high of US$8.92.

 

Wheat's fundamentals do not justify prices near US$9 amid projections for a big harvest in the U.S. and around the world, analysts said. The U.S. Department of Agriculture this week raised its forecast for 2008-09 U.S. all winter wheat production due to strong yield expectations.

 

"For corn and beans, you have a bullish story," Wagner said, referring to the heavy rains in the Midwest. "Wheat is more like a supported character."

 

Wheat will continue to watch corn moving forward, an analyst said. The markets will trade weather for corn and crop conditions and try to assess the damage that's been done from flooding, he said.

 

 

Kansas City Board of Trade

 

KCBT wheat futures were pulled up by CBOT corn and CBOT wheat. Without spillover strength from corn, the market would have been under more harvest pressure as cutting advances in the Plains, a KCBT floor trader said.

 

Harvest activity should pick up in Kansas this weekend due to clear weather, traders said. Dispatches from the Plains indicate strong yields and test weights in wheat that has already been cut.

 

"We kind of thought maybe today we would pull back, but it was strong again today," the KCBT floor trader said. "We wouldn't normally be trading USUS$9.25 (in the July contract). Definitely, we're getting whipped around by the other markets."

 

 

Minneapolis Grain Exchange

 

MGE wheat futures followed CBOT corn to the upside.

 

"We just chopped around, watched corn," a MGE floor trader said. "They'd rally and sell of a little bit, and we'd just do the same thing. It looks like corn is king again."

 

The daily trading limit for MGE wheat on Monday remains expanded to 90 cents after a limit-up close Wednesday. The limit will stay at the default level of 60 cents at the CBOT and KCBT.