May 30, 2008

 

US Wheat Review on Thursday: Crumbles on spillover, harvest pressure

 

 

U.S. wheat futures crumbled Thursday on spillover weakness from other markets and pressure from the Northern Hemisphere's approaching harvest.

 

Chicago Board of Trade July wheat fell 15 1/2 cents to US$7.43 1/2 per bushel. Kansas City Board of Trade July wheat shed 9 1/2 cents to US$7.94, and Minneapolis Grain Exchange July wheat dropped 5 1/2 cents to US$10.44 1/2.

 

Sharp sell-offs in CBOT corn and soybeans and in outside markets like crude oil and gold weighed on wheat. Strength in the U.S. dollar index also was seen as bearish for the grains, as a firm greenback gives foreign importers less buying power, traders said.

 

Early harvest activity in the U.S. and anticipation for cutting in the rest of the Northern Hemisphere added pressure, analysts said. Harvest has started in areas of Texas, Oklahoma and the Delta, according to crop dispatches.

 

Wheat and flour buyers are likely waiting to jump into the market until harvest gets into full swing and pushes prices even lower, said Dale Durchholz, analyst for AgriVisor. Harvest is bearish because it means new supplies are entering the market.

 

"I think the wheat game at this point as much as anything is called, 'I don't have a reason to be a big buyer yet,'" Durchholz said. "Wheat's still saddled with this harvest, not only here but in the rest of the Northern Hemisphere. It looks like we're going to have an OK crop this year."

 

CBOT July wheat temporarily traded below technical support at US$7.40 1/2 during the day session but closed above that level. The market faces more downside risk heading into active cutting, with CBOT July wheat likely aiming for US$6.50 to US$7, Durchholz said.

 

 

Kansas City Board of Trade

 

Advancing harvest activity in the southern Plains was bearish for KCBT wheat, a floor trader said. Harvest in Kansas should start in mid- to late-June due to development delays caused by cool weather.

 

"We're getting to the point where I'm fairly comfortable saying we're going to have a decent harvest," said Allan Fritz, Kansas State University wheat breeder. "I'm encouraged by where we're at."

 

The U.S. Department of Agriculture will release its weekly export sales report Friday, one day later than usual due to the Memorial Day holiday. Analysts predicted sales of 150,000 to 600,000 tonnes for the week ended May 22.

 

The USDA on May 21 announced private export sales of 400,000 metric tonnes of hard red winter wheat for delivery to Iraq in the 2008-09 marketing year. But traders said the Grain Board of Iraq had bought some 600,000 tonnes of HRW wheat from the U.S.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures closed lower with the neighboring and outside markets. The "name of the game" for the session was the weak dollar and spillover pressure, an analyst said.

 

Drought remains "intense" across spring wheat areas of North Dakota, but moisture levels in the rest of the northern Plains have improved significantly, particularly in the past week, according to Cropcast Agricultural Weather. Rains in the coming weeks should "wipe out leftover dryness" in Montana and cut into the drought in North Dakota, the private weather firm said.