US Wheat Review on Wednesday: Disappointing demand pressures prices

 

 

Disappointment about export demand and technical selling pushed U.S. wheat futures to fresh lows for the year Wednesday.

 

Chicago Board of Trade March wheat closed down 10 1/4 cents at US$5.42 1/4 a bushel. Kansas City Board of Trade March wheat fell 11 cents to US$5.70, while Minneapolis Grain Exchange March wheat dropped 6 cents to US$6.37.

 

There was "a little disappointment" that Egypt's state-owned wheat buyer, the General Authority for Supply Commodities, didn't book any U.S. wheat in a tender, said Jason Britt, president of Central State Commodities. GASC bought 180,000 tonnes of French wheat and 28,000 tonnes of Russian wheat.

 

Traders and analysts expected the U.S. to win some of the business because U.S. wheat prices recently have become more competitive on the world market. GASC bought a cargo of U.S. soft red winter wheat in each of the two tenders it issued prior to Wednesday's tender.

 

"I think expectations were there that we were going to get a little more of that business," Britt said.

 

There was a lack of fresh supportive news for the markets, traders said. Commodity funds sold an estimated 3,000 contracts at the CBOT.

 

"We lost the Egyptian business again today, and I don't see really anything friendly on wheat," said Dan Cekander, analyst for Newedge USA. "Technically it's a mess. You took out the recent lows...so you're getting selling in here."

 

CBOT March wheat closed below the technical support level around US$5.48 to US$5.50 and set a new 2009 open-outcry low of US$5.39. The previous open-outcry low for the year was US$5.49.

 

It wouldn't be surprising to see the market reject lows between US$5.30 and US$5.40, Britt said. Wheat would need to see CBOT soybeans and corn collapse to start a major leg down, he said.

 

 

Kansas City Board of Trade

 

KCBT March wheat set a new open-outcry low for the year of US$5.70. The previous 2009 open-outcry low was US$5.79 1/2.

 

Strength in the U.S. dollar was a bearish influence on the market, as a firm dollar makes U.S. wheat less attractive to foreign buyers, an analyst said. It brings a stronger dollar to the forefront a bit when "exports aren't quite as good" as the market had expected, Britt said.

 

There was talk about precipitation expected in dry hard red winter wheat areas of the U.S. southern Plains Sunday to Tuesday, traders said. Still, the event won't be a "drought buster," a trader said.

 

 

Minneapolis Grain Exchange

 

MGE wheat trailed losses at the CBOT and KCBT. March wheat hit a session low of US$6.36 1/4, its lowest price since falling to US$6.24 1/2 on Jan 13.

 

Traders are waiting for the U.S. Department of Agriculture to issue its weekly export sales report at 8:30 a.m. EST Thursday. Analysts expect export sales to be 200,000 tonnes to 500,000 tonnes.