June 10, 2008

 

US Wheat Review on Monday: Profit-taking pressures markets before USDA

 

 

U.S. wheat futures tumbled Monday as traders booked profits following recent rallies and ahead of government crop reports.

 

Chicago Board of Trade July wheat slid 22 1/2 cents at US$7.88 1/2 per bushel, Kansas City Board of Trade July wheat ended down 21 1/4 cents at US$8.25 1/2, and Minneapolis Grain Exchange July wheat fell 31 1/4 cents to US$9.96.

 

The markets pulled back after climbing during the previous two sessions without much fundamental support, said Doug Houghtonne, analyst for Brock Associates. Data due out Tuesday from the U.S. Department of Agriculture are expected to show a bearish increase in 2008 all winter wheat production and in new-crop ending stocks.

 

The average of analysts' all winter wheat production estimates is 1.813 billion bushels, up from the USDA's May estimate of 1.778 billion, according to a Dow Jones Newswires survey. The average of analysts' estimates for 2008-09 U.S. wheat carryout is 496 million bushels, up from the USDA's May estimate of 483 million.

 

Although world wheat stocks remain historically low after poor weather slashed global output in 2007-08, an increase in U.S. carryout above 500 million bushels would "weigh on the market psychologically to some extent," Houghtonne said. The report is due out at 8:30 a.m. EDT.

 

"Right now, fundamentally, there's no reason for wheat to be moving a lot higher in the immediate term," Houghtonne said.

 

The markets' weakness came after wheat showed early strength on the back of gains in CBOT corn and soybeans. There was some intermarket spreading, with traders buying corn or soybeans while selling wheat, an analyst said.

 

 

Kansas City Board of Trade

 

Profit-taking dragged KCBT wheat futures deep into negative territory, traders said. Sell stops were triggered late in the session, and there were market-on-close sell orders, they said.

 

There was some market chatter about potential damage to Plains hard red winter wheat from weekend storms. However, output is still expected to be strong, traders said.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures were a follower of the other wheat markets, a floor trader said. Recent rains in the Dakotas seem to have eased concerns about dryness in key spring wheat-growing areas, he said.

 

As much as an inch of rain fell in areas of the Northern Plains during the weekend, according to DTN Meteorlogix. The region could see as much as an additional 2 inches in the first half of the week, the private weather firm said.