US Wheat Review on Monday: Sinks on USDA data, correction from gains

 

 

U.S. wheat futures tumbled Monday on bearish government estimates for increasing supplies and in a correction from recent rallies.

 

Chicago Board of Trade March wheat closed down 59 3/4 cents at US$5.69 3/4 per bushel after falling the daily, 60-cent limit. Kansas City Board of Trade March wheat dropped 56 cents to US$5.95, and Minneapolis Grain Exchange March wheat sank 52 cents to US$6.28 1/4.

 

Wheat has "very negative" fundamentals, including weak export demand and expanding ending stocks, said Louise Gartner, analyst for Spectrum Commodities. The U.S. has struggled to compete for export business against countries in the Black Sea region, such as Russia.

 

Wheat was due for a setback after climbing during the past month, partly on spillover support from CBOT corn and soybeans, traders said. At last Tuesday's close, CBOT March wheat was up US$1.72 1/2 from its recent low of US$4.71, hit on Dec. 5.

 

It looks as though the market has confirmed trading-range highs, Gartner said.

 

"The market just fell apart," she said. "I think it's just reflecting the fundamentals, and it's just getting no support from corn and beans."

 

The U.S. Department of Agriculture pegged 2008-09 U.S. wheat carryout at 655 million bushels and wheat stocks as of Dec. 1 at 1.422 billion bushels, above trade expectations. Lower-than-expected 2009 U.S. winter wheat plantings were unable to generate enough bullishness to support prices, traders said.

 

The USDA put all winter wheat seedings at 42.098 million acres, below the average analyst estimate of 44.178 million and the 46.181 million acres planted in 2008. Soft red winter wheat acres were pegged at 8.3 million acres, below the average analyst estimate of 9.381 million and the 11.2 million acres planted in 2008.

 

"If you've got increasing carryover, it's really hard to make a bullish case for new crop," Gartner said.

 

 

Kansas City Board of Trade

 

KCBT wheat closed lower on expanding supplies and spillover pressure from neighboring markets, traders said. CBOT March corn and soybeans closed down the daily, exchange-imposed limits.

 

Hard red winter wheat was planted on 30.2 million acres, below the average trade expectation of 31.096 million and the 31.22 million acres planted in 2008, according to the USDA. The drop in HRW wheat acres was surprising following favorable planting conditions, analysts said.

 

After the close of trading, Egypt's state-owned General Authority for Supply Commodities said it will tender Tuesday to buy at least 55,000 to 60,000 metric tonnes of wheat for shipment Feb. 5-20 on a free-on-board basis. The U.S. isn't a strong competitor for the business because prices are too high, a trader said.

 

 

Minneapolis Grain Exchange

 

MGE wheat closed lower with CBOT corn, soybeans and wheat. The markets could bounce a bit after the sharp selloffs in a "Turnaround Tuesday" scenario, a trader said.

 

"I think our markets were due for a correction," an analyst said. "Everything was negative this morning, except for the wheat acres."

 

Of the three U.S. wheat markets, CBOT was the only one in which contracts fell the 60-cent limit. MGE March wheat closed near its session low of US$6.28.