US Wheat Review on Wednesday: Sinks on profit-taking, funds, firm dollar

 

 

Pressure from outside markets and profit-taking knocked U.S. wheat futures sharply lower Wednesday as the markets backpedaled from recent gains.

 

Chicago Board of Trade July wheat closed down 52 cents at US$6.17 1/2 a bushel. Kansas City Board of Trade July wheat lost 47 1/4 cents to US$6.71 3/4. Minneapolis Grain Exchange July wheat ended down 59 3/4 cents at US$7.33 1/4 after briefly falling the daily 60-cent limit.

 

The markets were due for a pullback after hitting eight-month highs Monday on fund buying and supportive outside markets, traders said. Commodity funds Wednesday sold an estimated 7,000 contracts at the CBOT.

 

Wheat prices "shot up so much that there are a lot of profits for people to grab," an analyst said.

 

Fundamentals didn't support recent gains, as world wheat ending stocks for 2008-09 and 2009-10 are expected to be more than enough to meet demand, traders said. The recent rally also priced U.S. wheat out of the global export market, analysts said.

 

"We've got large old-crop stocks and, even with a smaller new crop, the supplies of wheat at harvest time this summer should be ample to meet the projected export demand," said Doug Houghtonne, analyst for Brock Associates.

 

CBOT July wheat has substantial support around US$6.15 and could shed another 40 cents quickly if it breaks below that level, Houghtonne said. The contract hit an open outcry session low of US$6.15.

 

 

Kansas City Board of Trade

 

KCBT wheat closed lower on strength in the U.S. dollar and a retreat from recent rallies, traders said. The market was "overbought" and overdue for a correction, an analyst said.

 

"You've got a market here that was driven up by a lot of speculative buying and inflation fears, and it's left without any actual demand," Houghtonne said. "Export sales for new-crop were very weak last week and you're coming into harvest."

 

The U.S. Department of Agriculture is due to issue weekly export sales data at 8:30 a.m. EDT Thursday. Export sales for wheat for the week ended May 28 are expected to be 100,000 tonnes to 400,000 tonnes, analysts said.

 

 

Minneapolis Grain Exchange

 

MGE wheat led the downside at the close. Nearby July wheat briefly fell the 60-cent limit, and new-crop September wheat closed down 60 cents at US$7.39.

 

Profit-taking and outside markets pressured prices, traders said. Gains in the U.S. dollar were a bearish influence, a turnaround from the weak dollar's recent role in supporting wheat, they said.