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Wheat surges on export hopes

09/07/2012 @ 3:39pm

U.S. wheat futures settled higher Friday on hopes for greater export demand and concerns about dryness in the U.S. southern Plains.

Thinly traded Chicago Board of Trade September wheat futures rose 12 3/4 cents or 1.5% to $8.84 3/4 a bushel. Most-active CBOT December wheat settled up 13 1/4 cents or 1.5% at $9.05 a bushel. Kansas City Board of Trade December wheat rose 11 3/4 cents or 1.3% to $9.23 1/4 a bushel. MGEX December wheat rose 8 1/2 cents or 0.9% to $9.58 a bushel.

Traders Friday continued to focus on the implications of an Egyptian wheat purchase on Thursday. Egypt's state-owned wheat buyer, the General Authority for Supply Commodities, said Thursday it bought a total of 300,000 metric tons of Russian and Romanian wheat for shipment Oct. 21-31 and 175,000 tons of Ukrainian, Russian and Romanian wheat for delivery Nov. 1-10.

After a drought curtailed Russian wheat production this year, analysts expect the country's exports could slow around November, leading to greater demand for U.S. wheat exports.

Also, "the market has reacted to the higher prices for Russian wheat yesterday," said Linn Group analyst Roy Huckabay. The prices in Egypt's tender were higher than in other purchases it made from Russia in recent weeks.

Mr. Huckabay added wheat has recently become competitive with corn as cattle feed in parts of the western Midwest, where some cattle feeders have started bidding for wheat in the past couple of weeks. The two feed grains are the same price in some areas, he said.

Wheat was also supported by worries about dry weather for Australia's wheat crop. Rabobank senior grains and oilseeds analyst Graydon Chong on Friday lowered his forecast for Australia's 2012-13 wheat production to 22.79 million metric tons--down 20% from last year's record crop--as dry weather hurts crop development in Western Australia.

Wheat traders are also concerned about dry weather in the U.S. southern Plains, where farmers will start to plant a new winter-wheat crop this month.

"You had some pretty good rains last week in Kansas and Oklahoma, but you had some pretty hot temperatures" that sapped away some of the moisture, said Joel Karlin, an analyst with Western Milling. Dry conditions could delay or reduce wheat planting in the region, he said.

Soybean futures settled lower, booking a third consecutive day of losses after reaching new all-time highs on Tuesday. Weak cash markets, a private forecast for a better soybean yield due to rain, and profit-taking weighed on futures.

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