Wheat futures on the Chicago Board of Trade and the Kansas City Board of Trade closed higher on Tuesday, following a broad-based commodities rally that lifted grains as well as crude oil and gold, traders said.
But spot spring wheat futures on the Minneapolis Grain Exchange closed lower for the first time since January 23, retreating from Friday's record highs near $20 per bushel on a mix of profit-taking and slightly weaker cash markets. "At $20, it looks like the country had March wheat to hedge. They actually found some wheat," Fortis Clearing Americas analyst Charlie Sernatinger said.
Traders noted that basis bids for 14 percent protein spring wheat in the Minneapolis cash wheat market hit a peak at midweek last week. The top offers rose to $4.75 over the MGE May futures contract, then eased to $4.25 by Thursday. "It was the demand for cash wheat that started this run. With immediate demand slackening a bit, that led our futures down," a Minneapolis trader said.
MGE March spring wheat settled down 75 cents, nearly 4 percent, at $18.60 per bushel, after falling limit-down to a session low of $18.00. May fell 13 cents to close at $15.47-1/2, with back months up 30 to down 10 cents.
Traders said the retreat started as firms began exiting long March/short May spreads amid a lack of commercial bids. The MGE March/May spread traded from an inverse of $3.70 down to $3.07 per bushel, premium March, they said.
Expanded daily trading limits accelerated the move. The limit in Minneapolis was set at $1.35 per bushel through Wednesday, while the limits in Chicago and Kansas City were at 60 cents. US wheat futures soared to all-time highs this month on tight supplies, with stocks projected to fall to the lowest levels in 60 years. Shortages of spring wheat, the type traded in Minneapolis, are the most acute.
Wheat futures on the Chicago Board of Trade and the Kansas City Board of Trade rallied to end higher, after briefly trading lower in sympathy with the sell-off in Minneapolis.
At the CBOT, March wheat closed up 8-1/2 cents at $10.36 per bushel, with back months up 5-1/2 to 22-1/4 cents. At the KCBT, March hard red winter wheat ended up 2-1/2 cents at $10.84-1/2, with deferreds up 2-3/4 to 17 cents. Soybeans led the rally in CBOT grains, rising to record highs amid Chinese demand for vegoils. Weakness in the US dollar added support.
Export news was generally supportive for wheat. Iraq on Monday bought 50,000 tonnes of US HRW wheat in its first purchase since last October, trade sources said. Japan said it was seeking 151,000 tonnes of milling wheat on Thursday, including 68,000 tonnes of US spring wheat, the type traded in Minneapolis. But Turkey postponed a tender for up to 200,000 tonnes of soft wheat.
The US Department of Agriculture said 20.451 million bushels of US wheat were inspected for export in the latest week, within estimates for 16 million to 22 million. On a bearish note, the Australian Bureau of Agricultural and Resource Economics slightly raised its estimate of the drought-hit 2007/08 wheat crop by 3 percent, to 13.1 million tonnes.
The supplement to Friday's CFTC report showed large speculators (excluding index funds) shifted to a net short position in CBOT wheat totalling 1,788 contracts in the week ended February 12. Funds were net long 1,962 contracts the previous week.