US Wheat Review on Monday: Bounces on strong outside markets, demand
A rally in the stock market, weakness in the U.S. dollar and supportive ideas about export demand pushed U.S. wheat futures higher Monday.
Chicago Board of Trade December wheat surged 25 cents to US$5.88 1/2 a bushel. Kansas City Board of Trade December wheat jumped 22 1/4 cents to US$6.27 1/4, and Minneapolis Grain Exchange December wheat gained 23 3/4 cents to US$6.63.
The markets were due for a recovery after CBOT December wheat on Friday hit the lowest price for a nearby contract on a monthly continuation chart since June 2007. Strong financial markets helped wheat bounce after economic turmoil pressured prices last week, an analyst said.
Wheat made bigger gains on the day than the neighboring CBOT corn and soybean markets, partly because it doesn't face the same harvest pressure as the row crops, an analyst said. December corn rose 3 1/4 cents, while November soybeans rose 18 cents.
Wheat has "a little bit better microfundamentals," said Mike Zuzolo, analyst for Risk Management Commodities. Export demand was a supportive for the markets, especially because a weaker dollar gives foreign importers more buying power, analysts said.
Egypt's state-owned wheat buyer, the General Authority for Supply Commodities, bought 265,000 metric tonnes of wheat in a tender, including 120,000 tonnes of U.S. soft red wheat. Jordan, meanwhile, said it was looking to buy 100,000 metric tonnes of wheat of any origin on a cost and freight basis.
"You have the notion in Chicago now that you have indeed found a value level because maybe the [global] supplies are not as big and available as the world thought they were," Zuzolo said. There are lingering concerns about crop losses due to poor weather in Australia and Argentina.
Rabobank Australia lowered its production forecast for Australia's wheat crop to 20.5 million from its estimate of 21 million last month. Trade estimates generally put the crop at 20 million to 23 million tonnes, a CBOT trader said.
Kansas City Board of Trade
Short covering helped KCBT wheat advance after recent sell-offs, a trader said. The market was in an oversold condition, he said.
Despite Monday's gains, it is important to remember that wheat is in a long-term bear market, said Louise Gartner, analyst for Spectrum Commodities. Wheat plantings this fall should be "steady if not higher than last year, especially with the plentiful moisture in the Plains," she said in a market comment.
"I still look at rallies, however we get them, as selling opportunities at least through the winter," Gartner said.
The USDA will issue an update on winter wheat planting in its weekly crop progress report, due out at 4 p.m. EDT Tuesday. The progress report was delayed a day because of the Columbus Day holiday.
Minneapolis Grain Exchange
MGE wheat closed higher with the other markets in a rebound from losses, a trader said. Recent sell-offs were "overdone," he said.
The weak dollar and strength in crude oil were friendly to the grains, an analyst said. The gains in the grains are "obviously tied to what's going on elsewhere - the dollar's down, the equities are up," he said.