US Wheat Review on Wednesday: Drops in line with neighbors, weak demand

 

 

U.S. wheat opened weak Wednesday and continued to slide into the close on the absence of any bullish drivers.

 

Chicago Board of Trade March wheat lost 12 3/4 cents to close at US$5.43 1/4 per bushel. The contract traded in a 13 3/4 cent range, topping at US$5.55 3/4. CBOT May wheat shed 13 cents to US$5.56. Kansas City Board of Trade March wheat dropped 11 cents to US$5.78, and Minneapolis Grain Exchange March wheat lost 12 cents to close at US$6.41 1/4.

 

Speculative funds sold an estimated 3,000 CBOT wheat contracts, according to post-close estimates.

 

From a fundamental perspective, the U.S. wheat market has no news to justify adding gains before the market closed Wednesday, said Prudential Bache analyst Shawn McCambridge.

 

After a quick digestion of the USDA's world stocks estimates on Tuesday, "we continue to focus on the export sector," McCambridge said. Several tenders have been issued this week for non-U.S. product. The potential for additional tenders exists, "but until something comes in for the U.S., support is limited," he said. "There's not much outside support for all markets across the floor."

 

Egypt's state-owned General Authority for Supply Commodities, or GASC, Wednesday said it will tender to buy 55,000 metric tonnes to 60,000 tonnes of wheat on Thursday, on a free-on-board basis for shipment March 11-20.

 

The GASC is looking to buy 55,000 to 60,000 tonnes of U.S. soft red wheat, U.S. soft white wheat, U.S. hard red wheat, Argentine wheat, French wheat, Australian wheat or Canadian wheat, Nomani Nomani, the undersecretary of the GASC vice chairman, told Dow Jones Newswires.

 

In China, "some light rain and light snow are likely on Sunday through Monday across far southern winter wheat areas and rapeseed that is grown to the south of wheat," said Mike Tannura of T-Storm Weather.

 

The General Forecast System "hints at substantial precipitation late next week, but such chances are very iffy," Tannura said.

 

Even with reductions in the area of drought affliction, concerns about the Chinese crop remain, but didn't act as an influential factor in Wednesday's session, McCambridge said.

 

 

Kansas City Board of Trade

 

Traders of hard red winter wheat continued selling after Tuesday's break, inspired by negative feelings about the economy and demand, a KCBT trader said.

 

The March-May spread narrowed as about 1,500 open interest positions per day continue to roll out of the nearby contract and into deferred months, the trader said.

 

By the end of the week, open interest in July contracts should top March, he added.

 

Given the general negative sentiment, the trader expects KCBT contracts to test last week's low around US$5.70.

 

 

Minneapolis Grain Exchange

 

Hard red spring wheat also watched the effects of macroeconomic concerns weigh on prices.

 

"I was watching crude oil go down and thought that probably means wheat will be coming down, too," an MGE trader said.

 

"The Obama presidency's less-than-great reception from our friends on Wall Street has spilled over onto the commodities page," he said.

 

MGE traders are also watching the March-May spreads, which narrowed Wednesday.

 

With only modest stocks available for delivery in Duluth, there may be room for the spread to expand as index funds continue to roll their positions, the trader said.