July 8, 2010

CBOT wheat futures end longest rally since November

CBOT wheat futures declined, ending the longest rally in almost eight months on speculation that increased output in the US may more than offset production losses in other exporting countries.

September-delivery wheat lost 0.9% to US$5.2575 a bushel on the CBOT at 2:02 p.m. Manila time, ending five days of gains. That was the longest winning streak for the most-active contract since November.

"Over time, I do expect the market to correct lower on the back of higher global supplies," Luke Mathews, a commodity strategist at Commonwealth Bank of Australia (CBA) said. Still, the decline will be "contingent on what the USDA actually has to say come Friday (July 9)," Mathews said.

The USDA is scheduled to release its latest estimate on agricultural global supply and demand, including wheat, corn and soy, tomorrow (July 9) in Washington.

Wheat in Russia's Volga District, which produces a quarter of the country's output, is suffering from drought after temperatures exceeded 35 degrees Celsius, Martell Crop Projections said in a Tuesday (July 6) report on its website.

Russia, the third-largest wheat exporter in the 2009-2010 season, is vying with Canada to rank as the second-largest shipper in the 2010-2011 season, according to data from the USDA.
US is the largest exporter of wheat in the world.

Yields of wheat ripening in daytime temperatures of 35 degrees Celsius were 78% lower than grain grown in 20 degrees Celsius, according to research by Iowa State University and Kansas State University.

Ukraine will probably reap less than 45 million tonnes of grain this year, after rains in western and southern parts of the country damaged crops, mostly barley, Liza Malyshko, an analyst at UkrAgroConsult, said yesterday (July 7), lowering an earlier forecast of 45.15 million tonnes.

Weather-related losses probably will come to between 300,000 and 400,000 tonnes after rains caused weeds to spread and battered plants, Malyshko said.

Ukraine was the fifth-largest wheat shipper in the 2009-2010 season, according to the USDA.

"Downgrades to Black Sea and western Europe wheat crops and also wet weather in the US have aided the market mentality over the past couple of weeks," CBA's Mathews said. That may continue to support the market until the USDA releases its next estimate on global output, he said.

December-delivery corn fell 0.2% to US$3.885 a bushel, while soy for November lost 0.3% to US$9.30 a bushel.

Excessive rains in some parts of the Midwest in the US may result in some "soy acreage not getting planted," Telvent DTN Inc. said in a forecast yesterday (July 7). The Midwest is the largest US corn and soy growing region.

A wave of low pressure moving north from the Gulf of Mexico may bring heavier rainfall toward the end of the week, Accuweather.com said yesterday (July 7).