December 11, 2007
US Wheat Review on Monday: Kansas City Board of Trade, Minneapolis Grain Exchange hit new all-time highs
U.S. wheat futures closed firmer but off session highs Monday as the markets pulled back a bit after hitting new all-time highs at the Kansas City Board of Trade and Minneapolis Grain Exchange.
Prices rallied at all three exchanges on the opening on technical buying following a limit-up close Friday and amid renewed concerns about tight global supplies, analysts said.
Chicago Board of Trade March wheat rose 8 cents to US$9.29 1/2 per bushel after hitting a session high of US$9.49. KCBT March wheat ended up 11 1/2 cents at US$9.61 1/2 after hitting a session high of US$9.78. MGE March wheat settled up 15 1/2 cents at US$10.18 after hitting a session high of US$10.31.
Carryover technical buying from Friday pushed U.S. wheat futures sharply higher in early activity, when KCBT and MGE contracts climbed to record highs, traders said. Commodity funds bought an estimated 5,000 contracts at the CBOT.
"You've got the charts on your side; you've got the funds on your side," said Tom Leffler, owner of Leffler Commodities.
India, meanwhile, confirmed before the open that it was tendering for 350,000 tonnes of wheat, which was seen as bullish because a large purchase will drain tight ending stocks, traders said. The U.S. is not expected to win any of the business because of disputes with India about quality standards.
Prices pulled back after the rally as follow-through buying tapered off and profit-taking began, an analyst said. Recent gains in the wheat markets have been overdone, Leffler said.
Along with India, several other countries, including Turkey, Pakistan, Morocco and Egypt have recently been in the market for wheat. There is some market chatter that Pakistan may back off on a tender to import 200,000 tonnes now that prices have spiked, a CBOT floor trader said.
"There's some business out there," Leffler said about export demand. "That business is going to slow down at these levels."
Weekly U.S. wheat export inspections for the week ended Dec. 6 were 26.573 million bushels, above trade expectations of 15 million to 20 million bushels. For the marketing year to date, 730.294 million bushels have been inspected for export, up from 439.757 million inspected at the same time last year, according to the U.S. Department of Agriculture.
The USDA is slated to issue its December supply and demand reports at 8:30 a.m. Tuesday. Traders expect only modest adjustments to wheat, including downward revisions to the USDA¡¯s projections for U.S. and world ending stocks.
The average of analysts' estimates for 2007-08 U.S. wheat carryout is 296 million bushels, down from 312 million in November, according to a Dow Jones Newswires survey of 13 analysts.
"That report ain't going to amount to much," Leffler said. "Everybody expects to see a little bit of a decrease."
Kansas City Board of Trade
KCBT December wheat set a new all-time high for a front- month contract of US$9.77, while the March contract hit a new high of US$9.78. KCBT December wheat ended up 11 cents at US$9.60.
The highs were reached in early trading on technical strength fears about tight supplies, analysts said. Volume was relatively light, a KCBT floor trader said.
A major winter storm in the Plains is expected to bring some moisture to dry hard red winter wheat growing areas, meteorologists said. However, the driest portions of western Kansas won't see as much precipitation as the eastern part of the state, they said.
Precipitation from the winter storm system will be segmented across the southern Plains, according to DTN Meteorlogix. Rains of up to three-quarters of an inch, with locally heavier amounts, are seen developing over northern-central Texas, central Oklahoma and southern-central Kansas Monday, the private weather firm said.
Wednesday should bring another round of moisture totaling up to three-quarters of an inch in northern-central Texas, central Oklahoma and southern-central Kansas, Meteorlogix said. The remainder of the Plains winter wheat belt will have only limited precipitation, although some beneficial moisture is possible over some very dry areas of western Texas, western Oklahoma and southwestern Kansas, according to the firm.
Minneapolis Grain Exchange
MGE December wheat rallied to a new all-time high of US$10.67, exceeding the previous high of US$10.43. The contract closed up 11 cents at US$10.54.
MGE March wheat hit limit up, 30 cents higher, on the screen, while new-crop MGE July wheat hit limit up in open auction trading. MGE July wheat closed up 27 1/2 cents at US$9.48.
There are bullish ideas U.S. growers may plant soybeans in the northern Plains in the spring, instead of wheat, to take advantage of strong soy prices, an analyst said. But wheat needs the acres to replenish spring wheat stocks, he said.