US Wheat Review on Tuesday: Sinks on limit-down CBOT corn, weak demand

 

 

Limit-down losses in Chicago Board of Trade corn futures and bearish government crop data pushed U.S. wheat futures sharply lower Tuesday.

 

Chicago Board of Trade March wheat closed down 36 3/4 cents at US$5.35 3/4 a bushel. Kansas City Board of Trade March wheat dropped 32 cents to US$5.34, and Minneapolis Grain Exchange March wheat sank 36 cents to US$5.42.

 

Selling spilled over into the wheat markets from corn, which closed down its daily 30-cent limit after the U.S. Department of Agriculture issued a huge U.S. production estimate, traders said. The grains are linked because both can be used for animal feed and funds often trade in a basket of commodities.

 

Commodity funds were heavy sellers of the grains Tuesday and sold an estimated 8,000 wheat contracts at the CBOT, traders said. CBOT March wheat in electronic trading hit a session low of US$5.20 1/2, its lowest price since Dec. 23.

 

USDA data had a bearish tonnee for wheat because the government increased its estimates for U.S. and world carryout and lowered its forecast for U.S. wheat exports, traders said. Export demand has sagged because there is strong foreign competition for business and U.S. wheat prices are seen as too high.

 

Egypt's state-owned wheat buyer, the General Authority for Supply Commodities, issued a tender for wheat after the close of trading, traders said. They will look at the results Wednesday to assess competition on the global market.

 

 

Kansas City Board of Trade

 

U.S. winter wheat seedings were lower than expected but large world supplies provide a "cushion" against the decline, an analyst said. That lessened the bullish impact of the seedings estimate, he said.

 

"An already burdensomely-supplied U.S. wheat market picked up still more inventories this month amid expected downward revisions to forecast export and feed demand," J.P. Morgan said in a note.

 

 

Minneapolis Grain Exchange

 

MGE wheat tumbled on pressure from limit-down CBOT corn and bearishness about the large world supplies, traders said. The wheat markets came within about 10 cents of falling their daily limit of 60 cents.

 

Wheat will likely take direction Wednesday from activity in the corn market, a trader said. Neighboring CBOT soy also fell hard Tuesday on a large crop estimate from the USDA.