December 19, 2008


US Wheat Review on Thursday: Extends rally with double-digit gains



U.S. wheat futures extended the week's rally, closing Thursday's trading session with double-digit grains.


Follow-through buying on the week's rally drove the bid, traders said.


The Chicago Board of Trade March wheat contract jumped 14 cents to close at US$5.71 1/2 per bushel, just under the day's high of US$5.75. The contract traded in a 20-cent range. Kansas City Board of Trade March wheat rose 12 1/4 cents to US$5.90 1/2, and Minneapolis Grain Exchange March wheat added 12 cents to US$6.31.


Speculative funds purchased about 1,000 lots, according to midday estimates.


"There's a little bit of a bid with follow-through buying," a CBOT floor trader said, characterizing the day's overall trade as "quiet." Winterkill concerns continue to drive some purchases, another trader said.


"It is, of course, far, far too early to be concerned about material damage to the wheat crop for as we have learned over the years, wheat is a very hardy crop," Dennis Gartman noted in Thursday's The Gartman Letter.


"But," he added, "this situation does indeed bear watching."


Wheat "can survive droughts; it can survive heat and it can survive cold, but in order to survive the latter it does need snow cover," Gartman said. "Thus far, snow cover has been lacking."


The mid- to long-term outlook for wheat remains strong, said Tim Hannagan, a senior market analyst at Alaron Trading.


The high percentage of wheat rated good-to-excellent when it hit dormancy "is setting us up to be the primary port of origin [of quality wheat] in the spring," Hannagan said.


The rest of world "grew all this wheat ... and the quality just isn't there," he added.


With "one good drought," Hannagan said, "summer rallies could be unlimited."



Kansas City Board Of Trade


Meteorologists say the threat of winterkill is focused on the west-central Plains.


Temperatures of minus 10 degrees Fahrenheit are likely across Nebraska and into western Iowa on Sunday morning and may dip into northern Kansas, said meteorologist Mike Tannura of T-Storm Weather.


"Winterkill remains a threat - especially from east-central Colorado into central-northern Kansas where snow cover should be locally lacking and temperatures will be near to below 0. Snow cover is plausible for much of Nebraska, which should reduce the threat despite intense cold."



Minneapolis Grain Exchange


The spread between March and May tightened, as the market saw "a little more farmer selling with these prices," an MGE floor trader said.


Open outcry trading at the Minneapolis Grain Exchange will cease after Friday's trading session.


"I would expect volume to continue to dwindle as we move toward the holidays," said Ryan Kelbrants, a Benson Quinn Commodities analyst.


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