March 20, 2008

 

US Wheat Review on Wednesday: Falls 90-cent limit on broad sell-off

 

 

U.S. wheat futures fell hard Wednesday in a broad-based commodity sell-off, with contacts at all three exchanges closing limit down, traders said.

 

Chicago Board of Trade May wheat closed limit down, 90 cents lower, at US$10.74 per bushel and was synthetically trading between US$10.68-US$10.72, traders said. KCBT May wheat closed 90 cents lower at US$11.23, and MGE May wheat was 70 cents lower at US$13.40.

 

There was spillover pressure on wheat from neighboring and outside markets amid jitters about the health of the economy, traders said. CBOT wheat, corn and soybean futures all ended limit down.

 

"It's liquidation," said Greg Wagner, senior commodity analyst for AgResource Company. "It kind of feeds on itself."

 

A rebound in the U.S. dollar added to the bearish tonnee. There also was some bearish fundamental news out, with Egypt's state-owned General Authority for Supply Commodities canceling a tender for wheat. However, wheat was mainly focused on the weakness in outside markets, an analyst said.

 

"You can ignore the fundamentals," said Mike Zarembski, senior commodities analyst with optionsXpress. "It's really just a flight to liquidity."

 

Egypt, a major buyer on the world market, issued another tender after the close. GASC said it will tender to buy at least 55,000 to 60,000 metric tonnes of wheat for shipment from April 21-30 and/or May 1-10, on a free-on-board basis. GASC typically tenders for that amount and buys more.

 

Commodity funds sold an estimated 3,000 contracts.

 

Daily trading limits for CBOT and KCBT wheat futures Thursday will increase to US$1.35 from 90 cents, the exchanges said. The limit for MGE wheat futures will remain 90 cents.

 

 

Kansas City Board of Trade

 

KCBT May wheat at the close was synthetically trading between US$11.08 and US$11.18, a floor trader said. Pressure from outside markets like gold and crude oil weighed on wheat, he said.

 

Market participants "just kind of leaned on it all day," the floor trader said. There is "just still general nervousness (about) seeing money moving out of the markets."

 

It was "a little disappointing" that GASC canceled its tender, a KCBT floor trader said.

 

 

Minneapolis Grain Exchange

 

MGE July wheat closed limit down, 90 cents lower, at US$11.70 but wasn't trading synthetically lower, a floor trader said. Nearby MGE May wheat didn't end limit down as there looks to be "still a little bit of demand for the old-crop spring wheat around," a floor trader said.

 

Spillover pressure from limit-down moves in CBOT corn and soybeans pulled U.S. wheat lower, the floor trader said. There was a general lack of fresh news for the market and a lack of trading interest, he said. Volatility remains high.

 

"We were just kind of milling around," the trader said. "We're moving almost a nickel per trade."