US wheat futures continue to find support from a tight world supply situation, and old-crop contracts representing the 2007 harvest may get a chance to revisit the all-time highs set in September. Two weeks ago, it looked like the historic wheat rally of 2007 was virtually extinguished.
Nearby wheat futures on the Chicago Board of Trade had fallen more than $2 off the record highs set above $9.60 per bushel earlier this fall, when the market was in the throes of a global supply crunch. But the market caught fire again last week, with futures rising more than $1.40 since November 19. The old-crop December and March contracts led the way up.
With the world wheat stockpile forecast to dwindle to a 30-year low by the end of the 2007/08 marketing year on May 31, supplies remain so tight that every shred of bullish news has an exaggerated effect on the market. "You have to remind yourself that the wheat pit is still worried about old-crop supplies ... the fear that at some point, you've got to sweep all the bin bottoms to get enough wheat to fill that last vessel, or to make that last pound of flour," said Roy Huckabay, a commodities analyst with the Linn Group in Chicago.
Several bullish story lines have emerged in recent days. On the supply side, frosts this month threatened the yield potential of Argentina's developing crop. On Wednesday, Argentina's Agriculture Secretariat halted wheat exports for five days to assess cold-weather damage.
Rumours about Russia imposing further restrictions on grain exports continue to swirl in the market as well. And historic weakness in the US dollar has boosted all commodities. Meanwhile, export demand has picked up again, with India, Pakistan, Morocco and others seeking to add wheat coverage.
Traders say the pace of US wheat export sales must slow, or else domestic supplies could be threatened. Almost halfway through the 2007/08 marketing year ending May 31, the United States has already sold 89 percent of the USDA's projected export total for the year of 1.150 million bushels. US wheat sales as of November 22 totalled 27.9 million tonnes, or 1.025 billion bushels.
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