US Wheat Review: MGE March Surges To Record $25/Bushel (25% rise in a single day)

INO ^ | 02/25/08 | Tom Polansek

[TigerLikesRooster]

US Wheat Review: MGE March Surges To Record $25/Bushel

37 hours, 29 minutes ago

CHICAGO (Dow Jones)--Supply fears sparked a jaw-dropping rally in U.S. wheat futures Monday, with Minneapolis Grain Exchange March wheat climbing nearly 25% on the day, trader said.

MGE March wheat hit a record high of $25 per bushel before closing up $4.75 at $24. Supplies of high-protein spring wheat, traded at the MGE, are low and demand remains strong, traders said.

Chicago Board of Trade May wheat closed limit up, 60 cents higher, at $11.75. Kansas City Board of Trade May wheat was limit up, 60 cents higher, at $11.75. MGE May wheat was limit up, 90 cents higher, at $17.08 1/4.

News that Kazakhstan plans to curb grain exports starting March 1 helped kick off the rally in wheat, analysts said. Kazakhstan typically produces high-quality wheat and has been a strong competitor for export sales to Egypt, an analyst said.

The restriction of exports from Kazakhstan, through export tariffs, reminds traders that there are not many sources of wheat left in the world, an analyst said. Neighboring Russia has already imposed a wheat export tax of 40%.

Mostly CBOT wheat was following along with the MGE rally, traders said. CBOT May wheat was synthetically trading around $12.55 at the close, while new-crop CBOT July wheat was trading around $10.95, a floor trader said. Commodity funds bought an estimated 1,000 contracts.

The CBOT, KCBT and MGE on Tuesday will increase their daily trading limits for wheat futures, the exchanges said Monday. The daily limit for CBOT and KCBT wheat will rise to 90 cents from 60 cents. The limit for MGE wheat will jump to $1.35 from 90 cents. The three exchanges earlier this month increased their base daily limits to 60 cents from 30 cents and said they would increase limits by another 50% if at least two contract months within a crop year closed at limit bid or offer. Spot-month MGE March wheat is now trading without any limits, while the exchange's deferred contracts climbed their pre-existing 90-cent limit.

KCBT May wheat was synthetically trading 40 to 60 cents higher heading into the close, a KCBT trader said. New-crop KCBT July wheat closed limit up, 60 cents higher, at $11.25 3/4 and was synthetically trading 10 to 20 cents above that level at the close, he said.

Many KCBT contract ended limit up amid spillover from the rally at the MGE, traders said. Reports of drought damage in China also reignited concerns about tight global wheat supplies, a KCBT floor trader said.

A spring drought had affected 11.07 million hectares of farming acreage in China as of Saturday, said the Office of State Flood Control and Drought Relief Headquarters over the weekend. Of that amount, about 317,333 hectares of crops were affected by a drought, which started from last winter, in northern part of the country, it said in a statement published on its Web site. Meanwhile, some 1.33 million hectares of winter wheat in east China face a water shortage, it said. Northern China's spring planting of major crops such as soybean and corn, will start from April.

"We're back to trading the tight supplies," the KCBT floor trader said.

MGE March wheat was the leader of the wheat rally, traders said. The contract surged nearly 25% Monday and is up nearly 132% on the year.

There were wide price swings in MGE March wheat, with the contract at time jumping by 50 cents and $1, as open interest is low, a MGE floor trader said. As of the close Friday, open interest in the March future was 2,021 contracts, according to the MGE. It probably dropped to about 1,000 contracts Monday, a MGE floor trader said.

"There just wasn't a lot out there in the March," the trader said.

The Kazakhstan news was construed as bullish, with some analysts saying export quotas in the country reminded traders about tight world supplies. However, the market's main focus continues to be on tight U.S. supplies of high-protein spring wheat, traded at the MGE, a floor trader said.

"It seems like right now spring wheat is just the story," the trader said. "Spring wheat doesn't compete very much with wheat out of Kazakhstan."

MGE May wheat was synthetically trading about $2.50 higher at the close, the trader said.

-By Tom Polansek, Dow Jones Newswires; 312-341-5780; tom.polansek@dowjones.com

[TigerLikesRooster]

Ping!

[coconutt2000]

Too bad it wasn’t cattle futures, because then Hillary Clinton would’ve made a killing. /sarc

[diverteach]

http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article3423734.ece

Food shortages loom as wheat crop shrinks and prices rise
Jonathan Leake

THE world is only ten weeks away from running out of wheat supplies after stocks fell to their lowest levels for 50 years.

The crisis has pushed prices to an all-time high and could lead to further hikes in the price of bread, beer, biscuits and other basic foods.

It could also exacerbate serious food shortages in developing countries especially in Africa.

The crisis comes after two successive years of disastrous wheat harvests, which saw production fall from 624m to 600m tonnes, according to the United Nations’ Food and Agriculture Organisation (FAO).

Experts blame climate change as heatwaves caused a slump in harvests last year in eastern Europe, Canada, Morocco and Australia, all big wheat producers.

Booming populations and a switch to a meat-rich diet in the developing world also mean that about 110m tons of the world’s annual wheat crop is being diverted to feed livestock.

Short term pressures have compounded the problem. Speculative buying by investors gambling on further price rises has further pushed up prices.

Though shortages are often blamed on the use of land for biofuel crops, the main biofuel cereal crop is maize, not wheat. Farmers have brought millions of acres of fallow land into production and the FAO predicts that the shortages could be eliminated within 12 months.

[LS]

Sounds like American wheat farmers are gonna make some big money here.

[TLI]

Sounds like American wheat farmers are gonna make some big money here.

Export wheat from the u.S.? Sure! No problem.

A bushel of wheat for a barrel of oil.

[metmom]

Oh great. Something else to cost more......

I gotta rototill a bigger garden plot this year.

[metmom]

If the farmers are actually the ones to make the money...

[TigerLikesRooster]

Soon, rototiller will bite a huge chunk of lawnmower’s market share.

[Non-Sequitur]

I do not want to be caught on the long end of these contracts when the prices tank.

[jiggyboy]

I’m gonna buy a bunch of flour and pasta this week. Yeah it’s only a couple of bucks I’d save over the next year or so but in all seriousness I think we’ll be seeing shortages of wheat-related products before too long.

Look for prices at your local pizza joint to go up by a buck or so before too long as well.

FWIW, Hormel’s earnings announcement last week specifically mentioned that Spam sales were surprisingly strong. That’s a favorite for us gloom and doomers! (I particularly like the Tabasco-injected stuff for Cajun recipes like jambalya, etc.

[raybbr]

I like the Jennie-O Turkey Ham chub. It tastes great and is fairly healthy. Although I have seen the price per pound go up about a buck over the last year. A better alternative than Spam, I think.

[CPT Clay]

$25 a bushel?

Wow

[LS]

My dad was a farmer. He made money, trust me.

[metmom]

I was thinking of the diary farmers. I knew some and every time the price of milk went up, they never saw it. It was all the middlemen.

I wouldn’t know if the same applied to other farmers.

I’m guessing that apple orchard owners are going to do better as more people find out their apple concentrate is coming from China.

I’m glad we live in farm country. NY has it’s problems, but the variety of crops that can be grown here is amazing. And most of it normal everyday kind of stuff that people eat- apples, cherries,grapes, potatoes, onions, corn,.....

Granted the growing season isn’t long enough, but you do what you can.

[LS]

Well, I was thinking of non-subsidized farmers, too. From that perspective, the dairy guys had it coming. When the government sets your prices, you WON’T get profits.

[Sir_Ed]

"I’m glad we live in farm country. NY has it’s problems, but the variety of crops that can be grown here is amazing." My girlfriend is from Brooklyn and we go back every summer to visit. There's a fruit and vegatable store right by her Dad's house called "Three Guys From Brooklyn," and the amount, variety and CHEAP prices of their fruits and vegatables is AMAZING! Literally, the prices are HALF what they are compared to the local Albertson's here in Oregon, and the food is much fresher. The store is open 24 hours a day, and there are trucks coming in night and day from local farms in upstate New York and from New Jersey. It always amazed me, when I talked to the drivers of these trucks, that there are farms growing all these wonderful fruits and vegatables, like something you'd find in the Midwest, and they were only an hour or so away from New York City! For that matter, we visited the Finger Lakes region, and driving north of New York City in a relatively short amount of time, you drive through Saugerties, Woodstock, etc., beautiful, heavily wooded areas that look as if you're driving through Idaho or Oregon, and you're just an hour away from Manhattan! Ed

[metmom]

I was in NYC once and was amazed myself how close you can be to the city and how rural and even wild it can be.

I line in the Finger Lakes region myself and love it.

I do know several farmers here who do a lot of business in NYC. For what it costs for them to drive a truck down with fresh picked produce, they more than make up for it. They sell it cheaper than what the stores charge there and get lots more than they could here, cause produce is so plentiful here in the summer and fall.

I have my tomatoes, peas, onions, and lettuce started now. The lettuce and peas go in as soon as the ground thaws out, they can handle frosts or a light freeze if covered.

Everything else has to wait until at least the middle of May.

Upstate NY is the perfect place to grow those staple vegetables. The soil is rich, the growing season is long enough, there’s almost always a good crop as we don’t often have a serious drought or pests to deal with. The worst thing is a late spring freeze that could damage the fruit crop if it happens after the blossoms set.

[Sir_Ed]

You live in the Finger Lakes region?

I love that area! It, along with the Gorges area of Ithica, is so beautiful.

You’re planting tomatoes already? here in Southern Oregon we don’t do that ‘til Mother’s Day!

I like planting heirlooms and cherry tomatoes.

Ed

[metmom]

I’m just starting them indoors. We’re buried in snow right now and the ground is hard as a rock. We have to wait until at least the middle of May for stuff like tomatoes and zucchini.

[bioqubit]

Surprisingly, what has driven this is the still growing success of farmer’s markets in New York City. Getting rid of the middleman has kept more farms from going out of business than any government program, plus the direct connection with consumers has led to farmers growing a greater diversity of crops which only been healthy ecologically as well as financially, not to the mention the healthier diets urban residents have.

Profits flowed to the regions just out of the city, which has fostered economic growth where there used to be poverty.

So, it is a far more remarkable story than most realize.

[Sir_Ed]

“Surprisingly, what has driven this is the still growing success of farmer’s markets in New York City.”

Y’know what else is interesting? The numbers of garage sales in Manhattan.

We went to a Broadway play and before showtime we walked around the city, and there was two garage sales that were being held in auto parking lots that had closed down after 5.

They looked and felt just like garage sales in Oregon, except there were no guns of knives for sales, but there were tones of both used and new items...it was cool seeing free-market capitalism in such a highly-regulated city.

Ed