DJ US Wheat Review: CBOT Dec Sets Record High On Strong Demand
By Tom Polansek
Of DOW JONES NEWSWIRES
CHICAGO (Dow Jones)--U.S. wheat futures finished firmer on strong demand but
trimmed gains after climbing to historic highs, with Chicago Board of Trade
December wheat setting a new all-time high in early trading, analysts said.
Chicago Board of Trade September wheat rose 4 cents to settle at $7.22 1/2 a
bushel and set a new 11-year high of $7.41, exceeding its previous contract
high of $7.20. CBOT December wheat ended up 7 1/4 cents at $7.39 and set a new
all-time high of $7.54, exceeding the previous all-time record of $7.50.
The $7.50 all-time high, set in March 1996, was for a nearby contract. CBOT
December wheat is the second-month contract, but the record still stood as the
record all-time high at the CBOT and was seen as an important price target,
analysts said.
Adjusted for inflation, $7.50 in 1996 is equal to $9.96 in 2007.
Kansas City Board of Trade September wheat finished 6 3/4 cents higher at
$6.73 3/4. KCBT December wheat climbed 8 cents to $6.88 1/2.
Minneapolis Grain Exchange September wheat settled 8 1/2 cents higher at
$6.70 1/2, and MGE December wheat closed 10 cents higher at $6.81 1/2.
Wheat futures soared after the U.S. Department of Agriculture reported solid
weekly sales of 1.05 million metric tons for the week ended Aug. 16. Despite
soaring prices, world buyers have bought U.S. wheat at a rapid pace amid
production problems in Europe and the Black Sea region.
Strong demand is expected to continue in the near term as importers wait to
see how much wheat the Southern Hemisphere will produce, traders said.
Following a severe drought last year, Australia, a major world exporter, is off
the global market until it can harvest its wheat this fall.
"The buying has been incredible," said John Kleist, analyst with Kleist Ag
Consulting. "It's been amazing."
A lower-than-expected crop estimate from Statistics Canada also was seen as
bullish because it implied less competition from Canada for exports, an analyst
said. Statistics Canada slashed its projection for 2007-08 all-wheat production
to 20.322 million tons, down from 25.265 million in 2006-07.
Looking forward, $8 is the next major price target for CBOT December wheat
but getting there depends on importers continuing to book supplies at ever
higher prices, Kleist said.
Demand for U.S. wheat could slow if major importers
start to see improvements in the Australian and Argentine crops, he said. Parts
of the countries' wheat-growing regions have suffered from dryness.
Analysts agreed the move to historic high prices would encourage growers
around the world to seed more wheat. It wouldn't be surprising to see the
world's largest wheat crop ever next year, said Sid Love, analyst with Kropf &
Love Consulting.
"In my opinion, only bad weather will prevent us from having a record world
wheat crop in 2008," Love said. "If farmers don't plant wheat at these prices,
they should be given 15 yards for unsportsmanlike conduct." Even if world
plantings rise to unprecedented levels, the wheat still won't be available
until next spring at the earliest, an analyst said.
Commodity funds bought an estimated 4,000 contracts at the CBOT. In pit
trades, Fortis bought 2,000 September.
Kansas City Board of Trade
KCBT December wheat rallied to a session high of $7 on strong demand and
spillover support from gains at the CBOT, a floor trader said. KCBT December
wheat's previous contract and 11-year high was $6.94.
The market pulled back from its highs on profit-taking and amid the setback
at the CBOT, the trader said.
Traders expected Statistics Canada's all-wheat production estimate to be more
in line with the USDA's projection of 21.5 million, the trader said. The
lower-than-expected crop forecast was friendly, although the market is really
being ruled by demand, he said.
Minneapolis Grain Exchange
MGE wheat futures felt an early boost from strength at the CBOT and in
European markets, a floor trader said. Paris-based milling wheat futures traded
on Liffe opened on a record high Thursday on tight global supplies and
spillover strength from U.S. wheat futures but trimmed gains before the close.
The U.S. and E.U. wheat markets have been feeding on each other, traders
said. Rain continues to fall in parts of the U.K. to further delay the
remaining wheat harvest and threaten quality and yields.
World 2007-08 wheat ending stocks are at their lowest since 1979-80,
according to an updated forecast from the International Grains Council.
The IGC cut its forecast for the 2007-08 E.U. wheat crop by 3.9 million tons
to 122.8 million. IGC also cut the its world wheat crop estimate by seven
million tons to 607 million.
-By Tom Polansek, Dow Jones Newswires; 312-341-5780;
[email protected]
(END) Dow Jones Newswires
08-23-07 1553ET
Copyright (c) 2007 Dow Jones & Company, Inc.
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