August 7, 2007

 

US Wheat Review on Monday: New contract highs on demand, morocco

 

 

Strong export demand and hopes for a big sale to Morocco sent U.S. wheat futures sailing to new contract highs Monday, traders said.

 

Chicago Board of Trade September wheat ended up 14 cents at US$6.64 per bushel and set a new contract high of US$6.65. The previous high was US$6.64. CBOT December wheat closed 14 1/2 cents higher at US$6.83 1/2 and set a new contract high of US$6.84, exceeding the previous high of US$6.78.

 

Kansas City Board of Trade September wheat rose 7 3/4 cents to US$6.47 1/2, and KCBT December wheat settled 7 3/4 cents higher at US$6.62 3/4. Minneapolis Grain Exchange September wheat finished 9 1/2 cents higher at US$6.53, and MGE December wheat closed up 7 1/2 cents at US$6.62 3/4.

 

The strong gains reflect a sense that the trade is becoming more comfortable at elevated price levels, said Shawn McCambridge, analyst at Prudential Financial in Chicago. There have been concerns that strong U.S. futures prices would scare off buyers, but new tenders show that demand is still around, he said.

 

Morocco issued a tender for about 630,000 metric tonnes of soft wheat of optional origin and 350,000 tonnes of European Union soft milling wheat, traders said. The optional origin tender was a "huge" support underneath the market, a CBOT floor broker said.

 

Weekly U.S. wheat export inspections also were higher than expected. The U.S. Department of Agriculture said inspections for the week ended Aug. 2 were 25.127 million bushels, above analysts' estimates of 16 million to 22 million.

 

For the current market year to date, 157.991 million bushels have been inspected for export, up from 143.388 million at the same time last market year. The U.S. has seen strong export business recently due to global production problems, including in Europe and the Black Sea region, and tight supplies.

 

"The market feels a little more comfortable that we're not pricing ourselves out at these price levels," McCambridge said.

 

The U.S. also might see more business from Egypt after Syria's General Establishment for Cereal Processing and Trade said it may cancel contracts to export 700,000 tonnes of wheat to Egypt, McCambridge said. Syria does not have enough grain on hand to export following a season of poor growing conditions, a government official said.

 

U.S. wheat futures slumped at the opening on follow-through selling overnight and amid spillover pressure from CBOT soybeans, which closed which double-digit losses. However, the markets quickly bounced on gains in E.U. wheat futures and Morocco's tender, traders said.

 

In CBOT pit trades, Man Financial bought 500 September. Commodity funds bought an estimated 2,000 contracts.

 

"It wasn't a big trade," a CBOT floor broker said.

 

Looking forward, market participants are waiting for the USDA to release its crop production and supply/demand reports Friday, traders said. The USDA resurveyed wheat producers in Kansas and Oklahoma to assess harvested acreage after flooding in June.

 

 

Kansas City Board of Trade

 

Although Morocco is seeking to buy soft wheat, which is traded at the CBOT, the North African tender still lent support to KCBT wheat futures, a KCBT floor trader said. KCBT wheat followed CBOT wheat higher, with additional strength seen from the strong export inspections, he said.

 

With global supplies historically tight, U.S. wheat futures should stay strong until the E.U. can start supplying wheat to some of its traditional North African customers, a broker said. Heavy rains have hit western Europe's wheat fields at harvest time, delaying cutting and damaging the crop, while eastern Europe has suffered from dryness.

 

In other news, there are concerns that U.S. hard red winter wheat producers will have trouble finding high-quality seed to plant this fall after a poor harvest this year, the KCBT floor trader said.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures followed CBOT wheat higher, a floor trader said. The day session was "not too busy," he said.

 

The USDA is slated to release its weekly crop progress report at 4 p.m. EDT. A "small decline" is expected in the good-to-excellent condition of the U.S. spring wheat crop but "nothing major," an analyst said.

 

A week ago, the USDA rated 68% of the crop in good-to- excellent condition.