US Wheat Review on Wednesday: Sinks on wet forecasts, technical selling

 

 

U.S. wheat futures fell hard Wednesday on forecasts for precipitation in the dry U.S. hard red winter wheat belt and on technical selling.

 

Chicago Board of Trade May wheat sank 27 cents to US$5.08 a bushel. Kansas City Board of Trade May wheat tumbled 33 cents to US$5.55, and Minneapolis Grain Exchange May wheat dropped 24 cents to US$6.05.

 

Wet weather in the U.S. central and southern Plains is expected to help HRW wheat recover from dryness, traders said. The crop needs moisture because it has started growing again after being dormant for the winter.

 

Weak export demand and ample world supplies contributed to wheat's bearish fundamental picture, although those factors have been known for awhile, analysts said. U.S. wheat is priced too high to be competitive with other exporters, such as Russia, on the world market, they said.

 

Technical selling added pressure to wheat on the way down, traders said. CBOT July wheat, which represents the new soft red winter wheat crop, closed down 26 3/4 cents at US$5.20 3/4, below all major moving averages. Commodity funds sold an estimated 4,000 contracts at the CBOT.

 

There are ideas that the sell-off was overdone following a slide Tuesday. The market should rebound because it's still unknown how much effect the moisture will have on the crop, said Tom Leffler, owner of Leffler Commodities.

 

"I think the market's going to bounce back because I think they overdid it on the way down," he said. "We've got a crop out there. We still don't know what it's like."

 

 

Kansas City Board of Trade

 

"Widespread and significant snow" is probable across the HRW wheat belt starting Friday afternoon, according to T-Storm Weather. Widespread water-equivalent totals in excess of 1/2 inch are shown for most of the belt in Colorado, Kansas, Oklahoma, and northwest Texas, the private weather firm said.

 

Snow cover "should be more beneficial in adding needed moisture than detrimental by freezing back vegetation," Cropcast Agricultural Weather said. Another strong system may bring in more moisture to the region late next week or next weekend, T-Storm said.

 

"I'm having a hard time understanding the rhetoric I keep hearing that it's the weather breaking the market," said Leffler, who is based in Augusta, Kan. "I think it's too early to start feeling like everything's OK."

 

 

Minneapolis Grain Exchange

 

Analysts continued to focus on excessive wetness and flooding along the Red River. Widespread precipitation of 1/2 inch and up is expected to fall across much of North Dakota and South Dakota early next week, which will "probably increase flooding," T-Storm Weather said.

 

"Chances of delays in spring wheat planting are likely to be of note," Cropcast said in a forecast.

 

The May/July spread widened to 3 1/4 cents from 2 cents Tuesday, with the nearby contract trading at a premium. MGE July wheat closed down 25 1/4 cents at US$6.01 3/4.