CBOT wheat futures soar

Wheat futures at the Chicago Board of Trade soared to 11-year highs above $6 per bushel Thursday on concerns about US harvest delays, tight world supplies and technical momentum, traders said. The market hit contract highs for a fourth straight day, with nearby months leading the way up as commercials and speculators exited bear spreads.
CBOT July wheat settled up 17 cents, nearly 3 percent, at $6.06-1/2 per bushel, after reaching $6.19-1/4, the highest spot wheat price since spring 1996. Back months ended up 17-1/2 cents to down 7-1/2, with December up 8-1/2 at $6.21-1/2.
Commodity funds bought an estimated 10,000 contracts, traders said.
"It's driven by money, and everyone is afraid to sell," one CBOT wheat trader said. Daily volume in wheat was estimated by the CBOT at 208,199 futures contracts, which would be an all-time high if confirmed in official data on Friday.
At least 50,000 spreads traded electronically. Bullish moves were noted in wheat options as well. Worries about world wheat stocks continued to drive the market amid lingering weather problems.
"Shrinking supplies in the Wal-Mart of the world wheat market, which is Russia, and continued degradation of the US hard wheat crop with these incessant rains in the US Plains - those are the two big items," said Rich Feltes, senior vice president and director of Man Global Research in Chicago.
"I think there is a genuine fear that if FSU (former Soviet Union) wheat supplies continue to shrink, that US exports of wheat will be much higher than what USDA is forecasting currently, at 1 billion bushels for 2007/08."
At the Kansas City Board of Trade, spot July hard red winter what ended up 11-1/2 cents at $6.00, after reaching $6.18. KCBT led Chicago wheat early in the session.
Minneapolis Grain Exchange July spring wheat ended up 7 cents at $5.88. Excessive rain continued to disrupt the hard red winter wheat harvest in the southern US Plains, with accumulations of 0.5 to 2.0 inches across most of Oklahoma and central Kansas since Wednesday.
"The forecast couldn't be much worse. In Texas and Oklahoma very little harvest is getting done," said Mike Palmerino, a forecaster with DTN Meteorlogix. US wheat markets have been surging since Monday, when the US Department of Agriculture projected that global wheat stocks would drop to 112.03 million tonnes by the end of 2007/08, the lowest level since 1977/78. The small stockpile means there is little room for further production shortfalls.
Yet, declining crop estimates continue to trickle in. French analyst Strategie Grains on Thursday cut its monthly estimate of the European Union's 2007 soft wheat output to 121.8 million tonnes, down 2.6 million, due mainly to drought in the eastern countries of the European Union.
French wheat futures rose to historic highs, following the surge in US wheat prices. After the US markets closed, the Canadian Wheat Board projected western Canadian all-wheat production for 2007/08 at 21.2 million tonnes, down from 24.4 million in 2006/07.
Despite the sharp rally, fresh export demand also surfaced after the close, with Egypt's GASC saying it wanted to buy 55,000 to 60,000 tonnes of US, French, Australian, German, Argentine and/or Kazakh wheat for shipment July 11-20.
Tender results were expected on Friday. Weekly export data was supportive. The USDA said 413,100 tonnes of US wheat (2007/08) were sold for export last week, above estimates for 200,000 to 400,000 tonnes.
The CBOT July contract stayed above all key moving averages. The nine-day relative strength index stood at 85 ahead of the open, rising to 88 by the close. Technical traders view an RSI of 70 or above as one sign of an overbought market.