US Wheat Review on Wednesday: Sinks as US carryout tops 1 billion bushels

 

 

Pressure from plentiful ending stocks and disappointing demand drove U.S. wheat futures to five-month lows Wednesday.

 

Chicago Board of Trade May wheat sank 8 cents, or 1.6%, to US$4.81 1/2 a bushel. Kansas City Board of Trade May wheat fell 6 1/2 cents, or 1.3%, to US$4.91. Minneapolis Grain Exchange May wheat slipped 4 3/4 cents, or 0.9%, to US$5.06 1/2.

 

The U.S. Department of Agriculture, in its March supply and demand report, raised its forecast for 2009-10 U.S. wheat ending stocks by 20 million bushels to 1 billion, a 22-year high. It left all U.S. wheat exports unchanged from last month at 825 million bushels, "opening the door to further inventory builds if sales disappoint," J.P. Morgan said in a note.

 

In other export news, Egypt's state-owned wheat buyer, the General Authority for Supply Commodities, bought Russian and French wheat in a tender but none from the U.S. The snub was not a surprise but confirmed U.S. wheat is priced too high to be competitive on the world market, a trader said.

 

J.P. Morgan said it was concerned that export competition from the former Soviet Union could pressure U.S. sales further. Russia and Ukraine have become aggressive exporters and are known for offering low-cost wheat. Egypt, a major buyer on the world wheat market, is price-sensitive in its purchases.

 

CBOT May wheat hit a session low of US$4.78 a bushel, its lowest price since Oct. 6. Commodity funds sold an estimated 4,000 contracts at the CBOT.

 

 

Kansas City Board of Trade

 

KCBT May wheat set a session low of US$4.89 3/4, its lowest price since Oct. 5.

 

The markets showed their "true colors" by weakening after the bearish USDA report, a trader said. Production is expected to drop in 2010-11, but the world can absorb the decline because supplies are comfortable, he said.

 

 

Minneapolis Grain Exchange

 

MGE May wheat hit a fresh contract low of US$5.04 and closed at its lowest price since Oct. 5.

 

Traders are looking ahead to the USDA's March 31 prospective plantings report as the next major event for the market. It will give traders their first look at how the number of acres for hard red spring wheat is stacking up against last year.