August 13, 2008


US Wheat Review on Tuesday: CBOT slips; Kansas City Board of Trade, Minneapolis Grain Exchange close up with corn



U.S. wheat futures ended mixed Tuesday amid spillover support from a late rally in Chicago Board of Trade corn and bearish forecasts for an increase in world supplies.


CBOT September wheat fell 3 1/2 cents to US$7.90 1/4 per bushel. Kansas City Board of Trade September wheat rose 2 cents to US$8.27, and Minneapolis Grain Exchange September wheat jumped 9 1/2 cents to US$8.91 1/4.


Late gains in corn helped wheat trim early losses, traders said. CBOT September wheat closed well off its session low of US$7.77 after briefly trading higher in late dealings.


There was some corn-wheat spreading, traders said. UBS was noted buying 500 contracts of CBOT December corn and selling 500 contracts of CBOT December wheat.


U.S. Department of Agriculture forecasts for increased global production and carryout were seen as bearish. Global 2008-09 ending stocks were projected at 136.2 million metric tonnes, up from 133.1 million last month.


The USDA raised its forecast for world 2008-09 production 6.5 million tonnes from July to a record 670.8 million tonnes. Projected increases for the EU-27, India, Russia, Ukraine, and the U.S. more than offset reductions for Argentina and Afghanistan.


U.S. 2008-09 carryout was raised to 574 million bushels from 537 million in July, contrary to trade expectations for a decrease. An increase of soft red winter wheat stocks to 174 million bushels from 141 million last month helped keep CBOT wheat under pressure, an analyst said.


Looking ahead, large global supplies should continue to hang over the markets, a trader said. However, solid world export demand is expected to keep providing underlying support, he said.



Kansas City Board of Trade


KCBT wheat kept an eye on CBOT corn as the market shook off its early losses, a floor trader said. Volume was "really light" in the pit and slow on the screen, he said.


The USDA's estimates on domestic production were more neutral than forecasts for increasing global supplies, a KCBT trader said. The agency nudged its forecast for U.S. 2008-09 all wheat production to 2.462 billion bushels from 2.461 billion last month. Hard red winter wheat carryout rose to 243 million bushels from 232 million last month.



Minneapolis Grain Exchange


The turnaround in CBOT corn boosted MGE wheat futures, a floor trader said. Market participants were "mostly watching the corn all day," he said.


But MGE September wheat traded higher during the session even when deferred contracts and the other markets were in negative territory. The nearby contract has seen a "strong upward trend" since last week, a trader said.


September wheat traded at an inverse to December during the session, before December closed at a 1/2 cents premium to the nearby contract. A week ago, December wheat closed 17 cents above September.


Short covering has supported the nearby contract as it approaches expiration, a MGE floor trader said. There also are bullish concerns about spring wheat harvest delays and ideas that farmers might sit on their grain in hopes of higher prices, a MGE trader said. Harvest was 16% complete as of Sunday, behind the average of 36%, according to the USDA.


As for USDA crop data, hard spring wheat ending stocks dropped to 90 million bushels from 91 million last month.


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