March 18, 2008

 

US Wheat Review on Monday: Tumbles limit down on economy jitters

 

 

U.S. wheat futures tumbled Monday, with many contracts ending limit down as traders liquidated long positions amid economic jitters and steep losses in a number of markets.

 

Chicago Board of Trade May wheat closed limit down, 60 cents lower, at US$11.31 1/2 a bushel. Kansas City Board of Trade May wheat dropped 60 cents to US$12.00, and Minneapolis Grain Exchange May wheat slid 59 3/4 cents to US$13.90.

 

CBOT May wheat was synthetically trading around US$11.30 to US$11.31 at the close, a floor trader said. CBOT July wheat, which represents the new crop, was trading around US$10.97, he said.

 

Wheat tumbled as financial and equity markets sank following news that JPMorgan (JPM) agreed to buy Bear Stearns (BSC) at a massive discount and that the Federal Reserve stepped in with an emergency discount rate cut.

 

Shares of MF Global (MF), which is among the largest clearing members at the world's major derivatives exchanges, fell nearly 80% at their day's low on concerns that customers may start withdrawing cash. MF Global disputed that speculation.

 

Lingering nervousness about the health of the U.S. economy and continued weakness in financial markets will likely keep agricultural futures on the defensive, analysts said. CBOT corn and soybeans also ended limit down Monday.

 

"Like everyone else, we're going to see how long it takes for the Fed and the Treasury Department to stabilize things - how deep credit issues go with these banks," said Rich Feltes, senior vice president of research for MF Global.

 

Following recent setbacks in the grains and soybeans, importers will likely stay on the sidelines until market conditions stabilize, Feltes said. CBOT May wheat has lost a total of US$1.51 in the past three day-trading sessions.

 

But wheat will probably bounce back faster than corn or soybeans because "there is a lot of wheat business in the offing," Feltes said. Iraq may be in the market to buy soon, and India is expected this week to seek bids for wheat imports by using a call option to hedge against rising prices, according to a media report.

 

 

Kansas City Board of Trade

 

KCBT May wheat was synthetically trading around US$11.85 at the close, a floor trader said. KCBT July wheat, which represents the new crop, ended limit down at US$11.61 1/2 and was synthetically trading around US$11.56 1/2 at the close, he said.

 

KCBT May wheat hit limit down before any CBOT or MGE wheat futures. Volume was light all day, a trader said.

 

 

Minneapolis Grain Exchange

 

Deferred contracts at the MGE ended limit down but were not trading synthetically lower, a floor trader said. Volume was thin during the day session.

 

Daily trading limits for CBOT, KCBT and MGE wheat futures will expand to 90 cents Tuesday.