The Chicago Board of Trade wheat market may have fallen more than 10 percent from last month’s record highs but Friday showed that the market’s rally still has some legs.
    CBOT December wheat closed up the daily limit of 30 cents a bushel at $8.55-1/2, well below the record of $9.66-1/2 set in the March contract last month before profit-taking set in from the hot-money hedge funds and speculative pools which have powered the market to historic highs amid fears of coming global wheat shortages.
    That tight-supply scenario grabbed the market by the neck again on Friday as talk circulated that Russia will choke off its wheat exports by slapping on a tariff of as much as 30 percent. Russia has already set a 10 percent tariff to begin in mid-November.
    That move was a fresh signal to the world cash market that the breadbasket may only be offering crumbs for some buyers in the coming year, given drought-reduced wheat crops in many key regions including top exporters like Australia and Canada.
    CBOT March wheat also soared the 30-cent daily limit. Buying demand in December wheat options after futures locked up implied a close in December of $8.57-1/2, traders said.
    The bullish sentiment in wheat did nothing to hurt the nearby corn pit. Corn seemed to follow along, also getting some chart-based buying after advancing to near a three-week top when the December contract cracked nearby resistance at $3.68 a bushel this week. The high was made in the midst of an expected record large U.S. harvest of over 13 billion bushels.
    CBOT December corn closed up 3 cents at $3.70-1/4.
    Grain traders and analysts noted that the gains in both bellwether grains on Friday bucked the big tumble in the stock market, where the Dow Jones Industrial Average plummeted 367 points on earnings and subprime fears — on the 20th anniversary of the global 1987 market crash, no less.
    Commodities continue to draw in speculative funds from Wall Street, analysts noted, be they in the oil market (where crude hit a record $90 a barrel late in the week) or metals of grains. That seemed another element in the “flight to quality” seen on Friday as U.S. Treasuries soared as equities fell.
    Over in soybeans, however, it was a different story as  traders cashed in profits after a big run this week. CBOT November soybeans fell 8-1/4 cents at $9.83-1/4 a bushel and December soyoil down 0.43 cent at 40.56 cents per lb;
    Traders were sanguine about the day’s drops, however.
    Soybeans continue to be inspired by historic highs made in soyoil, a key food ingredient but where the biofuels craze — this time for soy-based biodiesel — has carved out a new, unexpected and powerful a piece of the demand pie. That is the same as in corn, where ethanol demand has kicked corn prices well above their decades-old historic levels of $2 a bushel.
    This week soyoil set a 23-year high at 41.14 cents per lb in the spot delivery, just shy of 41.15 cents made in May 1984. The next target will be 42.65 cents, notched on Nov. 14, 1974. The record high in soyoil is 51 cents made in October 1974.
    Are the markets getting “toppy?” Wheat’s bounce, corn’s strength despite a bin-busting harvest, and soyoil’s push all served as reminders of fundamental supply/demand strength.
    Analysts also note that the vaporous state of the U.S. dollar does not look set to change any time soon, given worries about credit crunches and recession. The Fed may want to raise interest rates, which would aid the dollar. But can it? No, analysts say, given weak economic signs emerging almost daily.
    The cheap dollar, therefore, while weighing on the Fed and the stock market, will continue to give importers of U.S. food and feed more buying power — and demand for CBOT grains.
    Things to watch in the coming week starting Sunday night, October 21 - 
     
    SPILLOVER EFFECTS FROM OUTSIDE MARKETS
    “We’ll be watching outside influences - the dollar, the stock market, gold and silver, the crude market - which were big influences this week,” one CBOT trader said.
    
    U.S. HARVEST WEATHER
    Chicago traders will also be watching Midwest forecasts to see if rains stop so farmers can resume harvesting corn and soybeans. Until the last week the U.S. harvest was ahead of schedule. But rains caused some slowdowns and boosted cash basis bids at many elevators. 
    The soybean harvest west of the Mississippi River, where the weather has been wetter, is under the greatest chance of being behind, traders said. The U.S. Agriculture Department will update its crop progress data on Monday afternoon.
    On the other hand, rains in the Plains (and Delta region) are good news for winter wheat prospects as soil moisture is replenished and next summer’s crops gets a solid start.
    
    SOUTH AMERICAN AND AUSTRALIAN WEATHER
    South American seeding weather is also improving, especially in Mato Grosso, Brazil’s No. 1 soybean region. Rains there last week were good enough that farmers were able to kick soybean seeding into high gear.
    The other key crop area CBOT traders are watching like hawks is Australia. Wheat crop estimates in the number two exporter have been cut drastically in the last two months by drought, a major factor behind CBOT wheat’s drive to record highs. But traders note that any rains in Australian wheat fields now will not only be “too little, too late” but also likely add to crop losses with early harvest under way.
    
    EXPORTS
    Last, but certainly not least, CBOT grain markets will be watching for — and expecting — continued strong export business as worried importers may continue studying their own and foreign crop prospects decide to hedge their bets and book even more supplies in a rising market.
    
    rtr chi cds