August 8, 2008


US Wheat Review on Thursday: Rallies hard on short-covering, demand



U.S. wheat futures surged Thursday on short-covering, technical buying and ideas that a price setback has sparked renewed interest from importers.


Nearby Chicago Board of Trade September wheat in late trading briefly climbed the daily, exchange-imposed limit of 60 cents. The contract closed up 56 1/2 cents at US$8.22 1/4 per bushel, while CBOT December wheat finished 56 1/4 cents higher at US$8.47.


Kansas City Board of Trade September wheat surged 50 3/4 cents to US$8.46 3/4. Minneapolis Grain Exchange September wheat soared 49 3/4 cents to US$9.03 1/2.


Strength in CBOT corn and soybeans helped open the door for wheat to rally, as weakness in the row crops recently has kept a lid on wheat, traders said. The markets were due for a bounce after tumbling Wednesday on fund liquidation in commodities, they said.


Commodity funds bought an estimated 4,000 wheat contracts at the CBOT, a trader said.


U.S. wheat export demand continues to look solid, analysts said. The U.S. Department of Agriculture said weekly U.S. wheat export sales were 682,600 metric tonnes, at the high end of expectations, which ranged from 400,000 to 700,000 tonnes.


Foreign countries are rebuilding inventories after world wheat ending stocks dipped to historically low levels in the 2007-08 marketing year, which ended June 1, an analyst said. Poor global weather slashed production last marketing year and drained supplies.


The export "numbers are excellent," said Jason Britt, broker/analyst at Central State Commodities. "They're holding in here extremely well."


Moving into the weekend, traders will be looking ahead to USDA crop reports due out at 8:30 a.m. EDT Tuesday. The reports will include new estimates on wheat production and ending stocks, along with data for corn and soybeans.



Kansas City Board of Trade


KCBT wheat futures climbed on technical buying and spillover strength from other markets. The strength in CBOT corn and soybeans and in crude oil helped encourage the wheat rally, he said.


Demand for hard red winter wheat remains a supportive factor, traders said. Of the total weekly export sales, 501,900 tonnes sold were HRW wheat.


However, the demand is nothing to get overly excited about, said Tom Leffler, owner of Leffler Commodities. Thursday's gains aren't too significant, as KCBT September wheat Wednesday fell to its lowest price since Dec. 4, he said.


"At the moment I don't really see anything out there that's really bullish the wheat market," Leffler said. "I think it's more short-covering and technical buying."



Minneapolis Grain Exchange


MGE wheat futures followed the other markets higher. Traders are waiting for the USDA reports to be released amid uncertainty about how the USDA will adjust its estimate for hard red spring wheat production, an analyst said.


The average of analysts' estimates for production of U.S. spring wheat other than durum was 510 million bushels, up slightly from the USDA's July estimate of 507 million, according to a Dow Jones Newswires survey of 14 analysts. A recent crop tour through North Dakota showed the crop suffered damage from hot, dry weather in western areas but was in good shape in the east.


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