December 13, 2007


US Wheat Review on Wednesday: Nearby Kansas City Board of Trade, Minneapolis Grain Exchange set new all-time highs



U.S. wheat futures sailed limit up Wednesday, with nearby Kansas City Board of Trade and Minneapolis Grain Exchange contracts setting new all-time highs amid little overhead resistance, traders said.


Chicago Board of Trade March wheat ended up 30 cents at US$9.40 1/2 per bushel. Kansas City Board of Trade March wheat closed up 30 cents at US$9.81 3/4, and Minneapolis Grain Exchange March wheat was up 30 cents at US$10.37.


There were few sellers who stepped out in front of the rally, and several commission house buy stops were hit at the CBOT, which accelerated gains, a CBOT floor trader said. Commodity funds bought an estimated 4,000 contracts at the CBOT.


The markets bounced after a weaker close Tuedsay. Short-covering pushed prices higher, floor traders said.


"Wheat has been thin," said John Kleist, analyst for Kleist Ag Consulting, about volume. "There are a lot of air pockets in either direction."


CBOT December wheat rose 40 cents, exceeding the typical 30-cent daily limit, to US$9.34 per bushel in a surge at the close. The contract is not bound by the normal price limit because it is in delivery.


Spillover support from strength in the neighboring CBOT soybean and corn markets pulled wheat higher, traders said. Soybeans, in a bullish uptrend, climbed to new 34-year highs, and wheat didn't want to be left behind, they said.


CBOT January soybeans ended up 16 cents at US$11.51 1/2, above psychological resistance at US$11.50.


"You have the idea that wheat looks a little bit undervalued, perhaps," Kleist said. "You look at beans at US$11.50 and maybe that US$9 (wheat) is a little too cheap."


There was bullish market chatter that funds are going to be interested in buying more commodities, which was supportive, an analyst said. Goldman Sachs raised its 12-month wheat price forecast to US$7.50/bu, up from a previous US$6/bu due to tight global supplies near-term.


The markets expect that a big winter wheat crop will help ease concerns about tight world supplies. However, a magazine survey of 2008 acreage intentions featured a smaller-than-expected number for wheat, Kleist said.


Based on a survey of farmers conducted in late November and on proprietary models, Farm Futures magazine estimated 2008 U.S. wheat plantings at 62.2 million acres of wheat, up from 60.4 million acres in 2007. The 2 million acre increase is "peanuts" and may have supported the rally, Kleist said.



Kansas City Board of Trade


KCBT December wheat set a new high of US$9.79, exceeding the previous high of US$9.77, amid a lack of sellers, a floor trader said. News that Egypt bought 30,000 tonnes of Russian wheat was announced before the opening but did not factor much in the day's trade, he said.


The purchase was small and the U.S. was not expected to win any of the business, the trader said. However, there is supportive speculation Egypt will soon be back in the market as a buyer, he said.


KCBT July wheat, which represents the new crop, lagged gains in the nearby contract due to a round of beneficial precipitation that hit dry areas of the U.S. Plains, a KCBT floor trader said. Up to about 7/10 inch fell in southeast and south-central Kansas, central Oklahoma and north-central Texas, according to DTN Meteorlogix. Thursday night into Friday may see development of more precipitation from Kansas southward, but it will be short-lived, the private weather firm said.



Minneapolis Grain Exchange


MGE December wheat set a new high of US$10.85, topping the previous high of US$10.67. That is the highest price any U.S. wheat future has ever traded at any exchange.


MGE, which has been a leader in the wheat markets recently, seemed to be following the CBOT higher, a MGE floor trader said. No one wanted to get in front of the market as a seller, he said.


Fears about tight global wheat supplies remain supportive, analysts said. There are ideas that India will take more wheat off the world market in the near term following a report that the Canadian Wheat Board expects to sell over 1.0 million metric tonnes of wheat to India this year.


The CWB has exported around 315,000 tonnes so far this year, the report said, so there were questions about the status of the remaining grain, traders said. India does not buy U.S. wheat due to disputes about quality requirements.