US Wheat Review on Wednesday: Slides on bearish report, slipping outsides

 

 

U.S. wheat futures slipped to their second lowest close of the year Wednesday, driven down by a bearish stocks estimate coupled with eroding support from corn, soybeans and outside markets.

 

Chicago Board of Trade May wheat dropped 24 1/2 cents to US$5.08 1/4 a bushel. The most actively traded contract traded at a 24-cent range, topping at US$5.30. July wheat shed 24 1/2 cents to US$5.20 1/4. Kansas City Board of Trade May wheat lost 22 3/4 cents to US$5.57 1/2. Minneapolis Grain Exchange May wheat slid 20 1/2 cents to US$6.05 1/2, while March wheat maintained its premium, closing down 21 1/2 cents at US$6.25.

 

Speculative funds sold an estimated 4,000 CBOT wheat contracts, according to closing estimates.

 

U.S. wheat ending stocks for the 2008-09 crop year are estimated at 712 million bushels, according to an updated supply-and-demand report released Wednesday by the U.S. Department of Agriculture. The average trade estimate was 659 million bushels, up from the USDA's February estimate of 655 million bushels.

 

Wheat losses were limited while corn and soybeans were posting gains, but a drop in crude oil and no real strength in stocks helped drive the agricultural commodities down, CBOT floor traders said.

 

"Soybeans and corn held wheat up for a while, but as they started to sell off, then real pressure came on wheat as well," said analyst Lynn Smith of the Zaner Group.

 

Now that Wednesday's trade is complete, the report has been traded and the market can return to its focus on the severe dryness in the wheat-growing areas of the Southwestern Pains, Smith said

 

Smith's colleague, Zaner analyst Rick Alexander, added that Wednesday's selloff did not hurt the bottoming formation that's been shaping up on Chicago wheat's price chart.

 

The increased wheat stocks were attributed to weakness in exports and domestic consumption.

 

"Exports are projected 20 million bushels lower as increased exports by major [foreign] competitors limit opportunities for U.S. wheat," according to the USDA report.

 

The new forecast for U.S. wheat exports is 980 million bushels, a drop from last month's prediction of 1 billion bushels, according to the report.

 

And U.S. mills are using less wheat to make the flour they produce, the USDA said.

 

"Food use is projected 25 million bushels lower based on the latest mill grind data from the U.S. Bureau of Census," the USDA said. "High extraction rates" for the 2008 wheat crop "have reduced the amount of grain needed to produce flour and lower per capita consumption is reducing demand for flour."

 

An increase in Australian wheat production and small increases in Morocco, India, Mexico and Bangladesh lifted global 2008-09 wheat output to a record 684.4 million metric tonnes, the report said.

 

Australia had "higher harvested area and better-than-expected yields, especially in Western Australia," the USDA said.

 

Global ending stocks rose by 5.9 million tonnes because of larger stocks in Russia, the U.S, Iran and China. At 155.9 million tonnes, the USDA projected world ending stocks will hit a six-year high.

 

 

Kansas City Board of Trade

 

Hard red wheat contracts at the Kansas City Board of Trade also slipped under pressure from the updated USDA supply-and-demand report.

 

Traders also felt pressure from forecasts that call for some moisture in the severely dry wheat-producing areas of the Southwestern Plains, according to KCBT market commentary.

 

Agricultural meteorologist Drew Lerner, president of World Weather, said he remains concerned that the 30-day outlook for the drought-stressed areas of HRW country portend drier-and-warmer-than-usual conditions.

 

He doesn't expect any current precipitation to offer aid to the areas in greatest need of moisture.

 

 

Minneapolis Grain Exchange

 

Traders of MGE hard spring wheat contracts maintained the front month's premium to the deferred months..

 

March contracts closed at a 19 1/2-cent premium to the May, 1/2 cent higher than Tuesday's inverse spread.

 

Traders and analysts cite tight deliverable stocks for the added March premium.