March wheat was up 11 cents late in the overnight session. With US wheat competitive on the world market and a recent jump in demand, traders see a tightening stocks situation into the spring. The market seems to have an adequate world supply of wheat, but various weather issues in Russia and then Australia have tightened up the available supply of high quality wheat for export on the world market. Extreme dryness in China’s growing areas and dry conditions for the US crop have continued to provide underlying support, and the weather in February/March weather will be very important to the global supply outlook. Domestic protests over high food prices in Algeria and Tunisia recently sparked strong buying of wheat on the world market. Furthermore, there was unrest over high prices spread to Yemen over the weekend. The reaction of many countries to higher food prices may be to lower import tariffs in an attempt to boost local supply. As the world pipeline for wheat expands slightly, there appears to be a very strong short-term demand trend and increased ammunition by the bulls to support the market. This may expand to rice, vegetable oils and sugar as other countries try to avoid protests over tight food supply. March wheat closed sharply higher on the session Friday and moved to its highest level since August 6th, while July wheat was also up strong and pushed to its highest level since September 2008. US wheat export sales were well above trade expectations on Friday, the highest in five months, and the tender wire has also been quite active. A weaker US dollar (its lowest since November 12th) and continued concerns for political unrest due to soaring food prices helped support the strong gains. Weekly export sales came in at 1.054 million tonnes for the current marketing year and 93,500 for the next marketing year for a total of 1.148 million. Sales of 409,000 metric tonnes are needed each week to reach the USDA forecast. On top of the weekly sales, private exporters reported to the USDA a sale of 150,000 tonnes of US hard red winter wheat for delivery to Jordan. In addition, European grain traders indicated that Tunisia bought 100,000 tonnes of durum wheat and 50,000 tonnes of feed barley. News of protests in Jordan over high prices helped to provide some underlying support as well. Bangladesh issued a tender to buy 50,000 tonnes of wheat and 30,000 tonnes of rice. The Commitments of Traders reports as of January 18th showed non-commercial traders were net long 25,076 contracts, a decrease of 1,303 contracts for the week. Commodity index traders held a net long position of 203,273 contracts, down 1,932 contracts for the week. The selling trend of the fund trader is seen as a short-term negative factor. Traders believe funds have been active buyers since January 18th.

Bron: CME