June 21, 2011
 

CBOT wheat tumbles to six-month low

CBOT wheat futures fell to a six-month low on Monday (Jun 20) as traders expected a return of better weather in northern hemisphere production regions.

CBOT July wheat, the US benchmark, dropped as much as 2.7% to US$6.5425 a bushel, the lowest since the beginning of December. The contract has tumbled 21.5% since its most recent peak of US$8.345 in mid-May.

Chris Gadd, agricultural commodities analyst at Macquarie, said, "Improving prospects for the US hard red winter wheat crop and significant rainfall across the EU have made the markets' bulls nervous."

In their annual outlook for food commodities markets published on Friday, the UN's Food and Agriculture Organisation and the Organisation for Economic Co-operation and Development said they expected wheat to be the only food commodity to decline in price in inflation-adjusted terms over the next decade, compared with the average of the past decade.

"By 2012, the 2010 price spike is assumed to have been mitigated by the higher supply response," the agencies said.

Investors have been cutting their positions in wheat in recent weeks. According to a report from the US Commodity Futures Trading Commission, speculators increased their net short position - or bet on lower prices - in CBOT wheat in the week to June 14. Speculators in the Kansas City Board of Trade wheat contract cut back their positions to the least bullish in 10 months.

However, analysts said the fall in prices could be short-lived. The USDA will release a highly anticipated report on agricultural commodity inventories and acreage next Thursday. With the corn market already extremely tight, any bullish signal from the USDA report could send corn prices soaring, and with them wheat, which can be substituted for corn in animal feed.