October 2, 2007
US Wheat Review on Monday: Kansas city board of trade, minneapolis grain exchange rally to new all-time highs
U.S. wheat futures soared Monday amid forecasts for continued dryness in Australia, with Kansas City Board of Trade and Minneapolis Grain Exchange wheat rising to fresh all-time highs, traders said.
Chicago Board of Trade December wheat climbed 13 1/2 cents at US$9.52 1/2 per bushel. The contract rose as high as US$9.58 1/2 during the day session.
KCBT December wheat ended up 20 cents at US$9.49 1/4 after setting a new all-time high of US$9.50 1/2, which topped the previous record of US$9.49 1/2. MGE December wheat hit a fresh high of US$9.31, exceeding the previous record of US$9.27 3/4, before finishing 20 3/4 cents higher at US$9.26 1/2.
All of Australia's major wheat-growing areas need more rain to prevent further declines in yield potential, DTN Meteorlogix said. However, the private weather firm calls for "very little" rain in major wheat districts during the next seven days.
Some rain may fall in Victoria, New South Wales and Queensland next weekend, but "it should not be enough to end dryness concerns," T-Storm Weather said in an outlook. Wheat maturation is probably beginning in some areas, the firm said.
Extended dryness in Australia, along with a reduction in the U.S. Department of Agriculture's forecast for 2007-08 total U.S. wheat production, indicate the USDA may tighten world ending stocks in its Oct. 12 crop production report, said Jerry Gidel, analyst with North America Risk Management Services. Global stocks are already pegged at a three-decade low.
The USDA on Friday pegged U.S. all wheat production at 2.067 billion bushels, down from 2.114 billion in August. Analysts had expected to see an increase in output.
It's "more likely that the USDA is going to tighten up its stocks because (wheat) is going to come out of (the U.S.) pile," Gidel said.
Statistics Canada on Thursday is slated to release production estimates for principal field crops, including wheat. In August, the agency pegged the crop at 20.322 million metric tonnes, down from 25.265 million tonnes the previous year.
Expectations for strong demand also continue to support U.S. wheat futures, analysts said. Egypt's state-owned General Authority for Supply Commodities said after the close it was tendering to buy 55,000-60,000 tonnes of wheat, although it will probably buy more.
The USDA said export inspections for the week ended Sep. 27 totaled 39.384 million bushels, at the high end of trade estimates. For the marketing year to date, inspections total 454.887 million, up from 280.326 million at the same time last year, the USDA said.
Commodity funds bought an estimated 2,000 contracts at the CBOT.
Kansas City Board of Trade
Nearby KCBT December wheat should continue to gain on CBOT December wheat due to strong global demand for hard red winter wheat, traders and analysts said. HRW, used to make bread, is traded at the KCBT.
In general, conditions in the U.S. Southern Plains winter wheat areas are favorable for planting the new crop, Meteorlogix said. However, above-normal temperatures and below-normal rainfall during the next seven days will diminish soil moisture for emergence and development of the crop, the firm said.
Minneapolis Grain Exchange
MGE wheat futures continued to feel support from a decrease in the USDA's forecast for 2007-08 U.S. other spring wheat production, traders said. The new estimate, released Friday, put other spring wheat output at 479 million bushels, down from 500 million in August.
The USDA lowered its estimate for North Dakota's 2007-08 other spring wheat output to 234 million bushels, down from 237.9 million in August. The decline may have been due to hot, dry weather, said Jim Peterson, marketing director for the North Dakota Wheat Commission.
"It was a little bit of a surprise to us that North Dakota spring wheat dropped as much as it did," Peterson said. "Some producers thought we'd go higher. The general consensus was that we'd go higher."
North Dakota producers will seed at least twice as much winter wheat this year as they did for the 2007-08 crop to take advantage of high prices, Peterson said. Last year, growers statewide planted 465,000 acres of winter wheat, harvested 445,000 acres and produced about 22.3 million bushels, according to the USDA.