May 21, 2008

 

US Wheat Review on Tuesday: Markets retreat on late sell-off

 

 

U.S. wheat futures closed mostly lower Tuesday as a recent technical recovery seemed to run out of steam, analysts said.

 

Chicago Board of Trade July wheat fell 7 cents to US$7.84 per bushel. Kansas City Board of Trade July wheat shed 6 1/4 cents to US$8.30 3/4, and Minneapolis Grain Exchange July wheat dropped 3 1/4 cents to US$10.34 1/4.

 

A late sell-off dragged prices lower. Wheat was firmer for most of the day session after ending higher Monday as the markets had been bouncing following sharp recent sell-offs, traders said.

 

The markets may have come under pressure as crude oil came off its highs, a CBOT floor analyst said. A weak U.S. dollar and surging crude oil prices helped support the grains in early dealings, he said.

 

The fundamental outlook for wheat remains weak amid expectations that the world in 2008-09 will produce more wheat than ever before, said Shawn McCambridge, analyst for Prudential Bache in Chicago. Output is predicted to hit a new record because of favorable weather and expanded plantings due to high prices.

 

"When you have fundamental weakness, you tend to be a little short-lived as far as corrective cycles," McCambridge said.

 

The late pullback was somewhat surprising given the strength in wheat earlier in the session, said Vic Lespinasse, analyst for grainanalyst.com. The neighboring CBOT corn and soybean markets also ended well off their session highs.

 

 

Kansas City Board of Trade

 

KCBT wheat futures pulled back on a round of late selling after seeing support earlier from the U.S. Department of Agriculture's weekly crop progress report and from firm outside markets, a trader said. The USDA said 45% of the winter wheat crop was in good to excellent condition, down from 47% the previous week, and 49% was headed, down from the average of 66%.

 

The progress report was "a little friendly" for wheat as traders had been expecting good-to-excellent ratings to remain unchanged or raise a few percentage points, an analyst said.

 

"This time of year we normally see a little deterioration in the crop," McCambridge said. "But we also have to keep in mind that the cool temperatures have slowed the crop development so we're not quite there yet. Heading is behind the five-year pace."

 

 

Minneapolis Grain Exchange

 

MGE July wheat ended lower as the market followed the setback at the other exchanges, a floor trader said. Deferred months ended firmer after rising earlier in the session with the other markets, he said. Volume was light.