Hard red winter wheat futures on the Kansas City Board of Trade surged to a sharply higher close on Monday amid speculation over reductions in Australian crop estimates and import plans by Pakistan, traders said.
The KCBT December contract ended up 29 cents at $8.58 a bushel, after rising the 30-cent daily limit to $8.59, while March closed up 28-1/2 cents at $8.56-1/2, after rallying to the 30-cent limit of $8.58. The gains left the nine-day relative strength index for December wheat at 79, in the range considered overbought.
The KCBT estimated pit volume at 6,343 lots, and electronic volume at 5,382 lots. The gains came amid rampant speculation over the size of cuts expected in an updated official forecast of the Australian wheat crop due Tuesday.
Dry weather has hit the crop in Australia, among the world's top three wheat exporters alongside the United States and Canada. The Australian Bureau of Agriculture's official forecast for its wheat crop is likely to be cut to less than 20 million tonnes on Tuesday, from 22.5 million tonnes, traders said. US grains analyst Shawn McCambridge said many market players were estimating production at 17 million to 18 million tonnes.
There was also bullish news Monday that the Pakistan government said on Saturday it had decided to import 1 million tonnes of wheat to maintain a reasonable buffer stock. Also supportive, the French Farm Ministry again cut its estimate for the country's 2007 soft wheat crop on Monday, to 31.65 million tonnes from 32.9 million tonnes last month, down nearly 5 percent from last year.
The tight world wheat supply situation prompted sharp gains in European milling wheat futures as well on Monday. The US Agriculture Department's report Monday on weekly export inspections of wheat was neutral to slightly disappointing. USDA said inspections totaled 29.650 million bushels, below trade estimates for 30 million to 35 million bushels.
In other export news, Taiwan's Flour Mills Association will hold a tender on Thursday to buy a total of 88,000 tonnes of US No 1 wheat in two shipments, Taipei-based traders said on Monday. Also, two groups of South Korean flour millers have issued tenders to buy a total of 47,700 tonnes of US No 1 wheat, with shipment set between October and December.
The tenders close on Tuesday. There were 189 redeliveries posted Monday against the expired September contract. ADM Investor Services stopped the lots, which had an oldest date of September 14.