US Wheat Review on Tuesday: Drops on fundamentals, outsides pressure

 

 

U.S. wheat took a precipitous drop Tuesday, under pressure from weaker crude oil, equities and a stronger U.S. dollar.

 

Chicago Board of Trade March wheat lost 20 cents to US$5.15 1/2 per bushel, at the bottom end of a 10-cent trading range. The most actively traded May contract dropped 20 1/4 cents to US$5.28.

 

Kansas City Board of Trade May wheat shed 24 3/4 cents to US$5.59, and Minneapolis Grain Exchange May wheat slipped 22 1/2 cents to US$6.02 1/4.

 

Speculative funds sold 4,000 contracts at the CBOT, according to midday estimates.

 

"It was a down day and we just bled into the finish," a CBOT floor broker said.

 

The lower prices are not factoring U.S. wheat back into the export market, as competitors' prices are slipping along with the U.S., he said, noting a "weak" wheat export inspections report released Tuesday by the U.S. Department of Agriculture.

 

U.S. wheat inspected for export shipment totaled 10.5 million bushels for the week ended Feb 12, according to the USDA. The weekly total trailed by 46% the previous week's export inspection total of 19.1 million bushels.

 

Inspections for the current marketing year trail the previous year by 175.1 million bushels.

 

The stronger U.S. dollar and strengthening ocean freight add to U.S. wheat's export woes, the broker added. The world's wheat demand is solid, but the market seems to have plenty to fill global demand and an upward revision to Australia's available stocks adds to the export surplus, the broker notes.

 

"There's nothing new in wheat; it's just following corn and beans along with the outside markets with the Dow Jones Industrial Average down 250 points, crude oil down US$3 and the dollar up," said Nathan Mangold, an Advance Trading broker.

 

"Chicago wheat is at full carry because the basis values are well below the delivery values," Mangold said.

 

Country elevator bids for some classes of U.S. wheat were approaching one-to-two month lows Tuesday, weakened by a general lack of demand. "U.S. wheat, which had become competitive on the world market, has once again lost its competitive edge. The recent Egyptian tender went to Russia, which was not a surprise," said Brian Henry of Archer Financial Services. "The overall price of U.S. wheat is a key factor, but a relatively strong dollar and increased ocean freight rates are also detrimental to the competitiveness of U.S. wheat."

 

Cash prices being paid for soft red winter wheat throughout the U.S. currently average about US$4.05 per bushel, representing the lowest level seen since Dec. 17. Hard red spring wheat prices at the farmgate stand at a one-month low of US$6.46, despite firming basis levels.

 

 

Kansas City Board of Trade

 

The hard red winter wheat-growing areas of the western Plains are still in need of rain.

 

But weather worries - both in the southern Plains and in China's drought-afflicted wheat land - have gone by the wayside, traders and analysts said.

 

"The market's paying attention, but it's not trading on the weather right now," a CBOT floor broker said.

 

 

Minneapolis Grain Exchange

 

Hard red spring wheat also ended lower with the front-month contract at a 17 1/2-cent premium to the May, as tight stocks in Duluth promise an interesting delivery period for the nearby contract.

 

"There's definitely more demand for protein this year," Mangold said. "I think one or more commercials are waiting to stop March [delivery receipts]."