October 23, 2007


US Wheat Review on Monday: Rallies late on Russia export-tax chatter



U.S. wheat futures ended sharply higher Monday in a rebound from early losses amid speculation that Russia's export tariff may be stiffer than expected, traders and analysts said.


Chicago Board of Trade December wheat rose 15 1/2 cents to US$8.71 per bushel, the contract's highest close since Oct. 11. Kansas City Board of Trade December wheat soared 19 cents to US$8.88, the contract's highest close since Oct. 5. Minneapolis Grain Exchange December wheat climbed 15 1/4 cents to US$8.85, the contract's highest close since Oct. 11.


The markets found support from chatter that Russia may impose a 50% export tariff on wheat, analysts said. The government has already approved a 10% tariff to begin next month, and there was support Friday from talk that it could be hiked to 30%.


Russia is an aggressive exporter of wheat on the world market, and there are ideas that U.S. sales may feel a boost if Russia's business takes a hit, traders said. However, analysts questioned whether a 50% tariff would have much more of an impact than a 30% tariff.


Louise Gartner, analyst with Spectrum Commodities, said talk about the increased export duty seemed as though it was "way out of left field." Neighboring Kazakhstan also has more wheat than the trade previously expected and may still be able to step up with a stronger export program, she said.


"I just don't see where it's that bullish," Gartner said about the possibility of a 50% tariff.


Nevertheless, the trade will continue to watch for confirmation of any adjustments to Russia's export guidelines, Gartner said. The trade will also keep waiting for any fresh demand news, CBOT floor traders said.


The firmer close followed weakness earlier in the day session. Wheat opened lower on follow-through selling from the overnight, spillover pressure from weaker outside markets and a rebound in the U.S. dollar, traders said.


A stronger greenback is seen as bearish because it gives foreign importers less buying power, analysts said. Weakness in the greenback last week provided the CBOT gains with underlying support.


In CBOT pit trades, Fimat bought 500 December and sold 300 December. Goldenberg Hehmeyer bought 300 December.


Non-commercial speculative funds trimmed long and short CBOT wheat futures and options positions in the week ended Oct. 16, the Commodity Futures Trading Commission said in a supplemental report. The funds cut long positions by 2,905 contracts, short positions by 2,472 and were net short 9,293 lots.



Kansas City Board of Trade


The U.S. Department of Agriculture is slated to release its weekly crop progress report, including updated data on winter wheat planting, at 4 p.m. EDT Monday. Some stormy weather in the U.S. Plains last week may have kept producers out of their fields, a KCBT floor trader said.


In Australia's wheat areas, showers, thundershowers and some rain from central New South Wales northward to southern Queensland will develop early this week, according to DTN Meteorlogix. Any rainfall will favor summer crops and any late-filling winter wheat but is unfavorable for maturing wheat and could delay the wheat harvest, the private weather firm said.


"Rainfall is arriving too late to make a significant improvement in the wheat crop prospects for Australia," Meteorlogix said.


Speculative funds decreased long KCBT wheat futures and options positions by 280 contracts and short positions by 2,651 contracts, the CFTC said in a supplemental report. They were net long 31,295 lots.



Minneapolis Grain Exchange


Weekly wheat export inspections of 26.749 million bushels were seen as being on the low side of expectations, a MGE floor trader said. For the year to date, U.S. wheat inspections totaled 553.743 million bushels, up from 338.567 million last year, according to the USDA.


Speculative funds cut long MGE wheat futures and options positions by 1,614 contracts and increased shorts by 775 contracts, according to the CFTC. They were net long 11,132 lots.


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