January 24, 2008

 

US Wheat Review on Wednesday: Hits limit down amid outside market pressure

 

 

U.S. wheat futures fell hard Wednesday, with some contracts settling limit down amid a continued sell-off in equities and fears about a recession, analysts said.

 

Chicago Board of Trade March wheat finished 29 cents lower at US$9.05 per bushel. Kansas City Board of Trade March wheat settled limit down at US$9.54 3/4 and was synthetically trading 5 to 10 cents lower at the close, a floor trader said. Minneapolis Grain Exchange March wheat slipped 12 cents to US$12.07.

 

A slide in outside equity markets weighed on commodities, with traders nervous to step out as buyers amid uncertainties about the economy, analysts said. Losses in crude oil and metals also pressured the grains, they said.

 

CBOT July wheat, which represents the new crop, led the downside early in the session as the contract corrected after closing out of line Tuesday. Old-crop contracts eventually joined the deferred months deep in negative territory.

 

CBOT March wheat temporarily traded limit down before trimming losses slightly at the close. CBOT July wheat closed limit down at US$8.60 3/4.

 

Weakness in outside markets also hammered CBOT soybeans and corn, adding to the bearish tonnee for wheat, an analyst said. Soybeans and corn closed limit down in many contracts.

 

Commodities should bounce back if equities stabilize, said Jason Britt, broker and analyst for Central State Commodities. The grains still have strong fundamental support, and wheat is needed for food, he said. End-users may step up as buyers to take advantage of the price breaks, Britt said.

 

"Once you see stabilization in that (equities) market, I think commodities will be the first thing to recover," Britt said. "We're not talking about widgets here. We're talking about food. End-users will be the ones that step up to the plate."

 

Along with thin world and U.S. stocks, the aggressive pace of 2007-08 export sales, inspections and shipments remain fundamentally bullish for wheat futures, Allendale Inc. said in a note to clients. Also bullish for wheat is the "pure lack of export competitions from traditional suppliers during this time of year," the note said.

 

 

Kansas City Board of Trade

 

KCBT March, May, July and September wheat closed limit down. KCBT July wheat, which represents the new crop, finished 30 cents lower at US$9.14 1/2 and was synthetically trading 5-10 cents lower at the close, a floor trader said.

 

"It was relatively slow, and most of the focus was on the outside markets," the KCBT floor trader said.

 

There "really wasn't any buying to speak of" with traders jittery uncertain about the outlook for the economy, the trader said.

 

"We were making 5 cents moves without any effort," the trader said.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures pushed higher early in the session on bullish momentum and ongoing demand for high-protein spring wheat, traders said. However, steep losses at the CBOT and KCBT tugged the MGE into negative territory, they said.

 

The heaviest losses were in new-crop contracts. MGE September wheat dropped 29 cents to US$10.06, and MGE December wheat closed limit down at US$10.05.

 

Strength in MGE wheat futures in recent sessions has been lending spillover support to CBOT and KCBT contracts. Once MGE prices slipped lower, "CBOT didn't have a chance," a CBOT floor analyst said.

 

In overnight electronic trading, MGE March wheat set a new record high of US$12.45, exceeding the previous high of US$12.24 3/4 set Tuesday. That is the highest price ever for a wheat contract at any U.S. exchange.