September 27, 2007

 

US Wheat Review on Wednesday: Fresh all-time highs on Australia, demand

 

 

Strong demand and fears about crop losses in Australia on Wednesday shoved U.S. wheat futures to fresh all-time highs at all-three exchanges, analysts said.

 

Nearby contracts closed at or near limit up, 30 cents higher.

 

Chicago Board of Trade December wheat soared 30 cents to US$9.17 1/4 per bushel, exceeding the previous all-time high of US$9.11 1/4. CBOT March wheat climbed 30 cents to US$9.22.

 

Kansas City Board of Trade December wheat closed up 29 3/4 cents at US$9.03 and topped the previous record high of US$8.87.

 

Minneapolis Grain Exchange December wheat closed up 30 cents at US$8.66, while MGE March wheat rose 30 cents to US$8.73 1/4. The contracts topped the previous record of US$8.60.

 

Australian Agriculture Minister Peter McGauran said the country's developing wheat crop could be the same size as last year, when production totaled about 10 million metric tonnes due to a savage drought. Just last week, the Australian Bureau of Agricultural and Resources Economics pegged the national crop at 15.5 million tonnes.

 

Dryness has plagued Australia's wheat fields for weeks as the crop has moved through important stages of development. With no significant rain in sight, McGauran's unofficial forecast seems credible, said Bill Nelson, associate vice president of AG Edwards & Sons in St. Louis.

 

"It's certainly not far fetched to think that we had back-to-back disasters in Australia in terms of yield," Nelson said.

 

Dryness should worsen in southeastern areas and Western Australia during the next seven to 10 days, T-Storm Weather said in a forecast. The private weather firm said "decent" rainfall affected South Australia and far southwest Victoria but most areas missed significant totals.

 

In Western Australia, "crop deterioration appears to be imminent," T-Storm said.

 

Unfavorable weather in other key wheat growing countries around the world, including Ukraine, slashed global output and supported U.S. wheat on its run to all-time highs this summer. The production problems also left the U.S. as one of the only sources of high-quality milling wheat for importers.

 

Despite high prices, demand for U.S. wheat still looks strong, analysts said. The U.S. Department of Agriculture announcing Algeria bought another 200,000 metric tonnes of hard red winter wheat, traders said. The USDA on Tuesday said Algeria bought 330,000 tonnes of U.S. HRW wheat.

 

Several tenders also continue to hang over the markets and offer support to prices, traders said. World wheat stocks are pegged at a three-decade low, and despite high prices, there are hopes the U.S. will secure more business.

 

Morocco's state wheat buyer, the Office National Interprofessional des Cereales et des Legumineuses, said it was tendering to buy 133,450 tonnes of soft milling wheat. Jordan's Ministry of Trade and Industry, meanwhile, said it was tendering to buy 100,000 tonnes of wheat.

 

The Grain Board of Iraq on Monday issued a tender to buy a minimum of 50,000 metric tonnes of hard wheat, although traders say it may buy more. On Tuesday, Pakistan said it was seeking 100,000 tonnes in a tender to be concluded Oct. 8 and Turkey said it needed to import 800,000 tonnes by the end of May.

 

 

Kansas City Board of Trade

 

KCBT wheat futures rallied on the strong demand news, floor traders said. Technical buying came in after prices pushed above previous all-time highs, they added.

 

"We were in no man's land," a KCBT trader said. "There was nothing holding us back."

 

Although December contracts at the CBOT and MGE ended limit up, KCBT December wheat closed 1/4 cent off the ceiling. There was some profit-taking seen during the late rally, and activity was volatile all day, a trader said.

 

 

Minneapolis Grain Exchange

 

The USDA on Friday is slated to release its September small grains report, and there are expectations for an increase in U.S. other spring wheat production, a MGE floor trader said. Strong yields in the Northern Plains should be reflected in the report, he said.

 

The average analyst estimate for 2007-08 all-wheat production was 2.119 billion bushels, an increase from the USDA's August estimate of 2.114 billion, according to a Dow Jones Newswires survey of eight analysts. The average analyst estimate for other spring wheat output was 507 million, up from the USDA's August forecast of 500 million.

 

The average estimate for quarterly wheat stocks was 1.832 billion bushels, up from 1.751 billion on Sept. 1, 2006, according to a survey of 11 analysts. The USDA had stocks at 456 million bushels as of June 1, 2007.