April 12, 2008

 

US Wheat Review on Friday: Slides on profit-taking, new-crop ideas

 

 

U.S. wheat futures tumbled Friday on profit-taking ahead of the weekend and bearish expectations for an influx of supplies from the upcoming new-crop harvest, analysts said.

 

Chicago Board of Trade May wheat closed down 26 1/2 cents at US$8.96 1/2 per bushel. Kansas City Board of Trade May wheat dropped 21 cents to US$9.53 3/4, and Minneapolis Grain Exchange May wheat sank 33 cents at US$12.92.

 

Fundamentally, the markets are going through a transition to the new crop from the old crop, said Greg Wagner, market analyst for AgResource Company. Expectations for a big winter wheat harvest around the world are bearish, as growers are thought to have expanded wheat plantings due to high prices.

 

"You're fighting this big macro force of a larger crop coming on," Wagner said. "With each passing day, that's going to become more apparent. As it becomes apparent, it's a reality that has to be addressed and it's addressed with price."

 

There was a sell-off of commodities by speculative funds, with losses in CBOT soybeans and corn adding pressure to wheat, traders said. Commodity funds sold an estimated 2,000 contracts at the CBOT.

 

Moving forward, the wheat markets will continue to take direction from the neighboring markets, analysts said. Wheat is seen as a follower of corn and soybeans, they said.

 

"If corn is not rallying, wheat's going to buckle," said Louise Gartner, analyst for Spectrum Commodities. "I just don't see what's going to prop it up."

 

 

Kansas City Board of Trade

 

Concerns about dryness in the western part of the U.S. Plains are easing after recent moisture, analysts said. The Plains saw "precipitation in a lot of areas that hadn't got precipitation," Wagner said.

 

"You get out of the western fourth of Kansas and things look pretty good," Gartner said.

 

 

Minneapolis Grain Exchange

 

The wheat markets next week may begin to pay more attention to spring wheat as planting in the northern Plains continues, Gartner said. Western areas of the northern Plains are dry, she said.

 

CBOT, KCBT and MGE wheat options on Monday will begin trading simultaneously via open-auction and electronic platforms. The contracts will be traded on the CME Globex platform during daytime open outcry trading hours.

 

"It's going to be interesting to see how quickly that business transitions to the screen" from the floor, Wagner said.