July 9, 2010

CBOT wheat futures slip 1%

Chicago wheat futures fell 1% on Friday (July 9) as the US market reflected a balance in its demand and supply report.

Corn and soy futures, which have climbed on the back of the strengthening wheat market and adverse weather in the US Midwest, also eased before the USDA's estimates due at 1230 GMT.

US front-month wheat futures have added around 9.5% this week in its best performance since October and soy is up more than 5%, registering its biggest gains since November. Corn has risen 3.2% so far this week, which comes on top of a near 7% rise last week.

Wheat futures rallied this week on concerns that hot weather could hurt the quality and yields of the European crop. Traders say a slight decline in the condition of US winter and spring wheat crops added support.

"We have the USDA demand and supply report tonight and US ending wheat stocks will be increased, so that is putting little pressure on the market and there is also profit-taking," said Kazuhiko Saito, chief commodities analyst at Fujitomi Co., a Tokyo-based futures trading firm.

The US wheat production forecast was expected to be raised by 96 million bushels in the USDA report as strong harvest results pour in from key production states such as Kansas, analysts said.

On Friday, CBOT September wheat lost 1% to trade at US$5.43 a bushel at 0400 GMT. September delivery corn fell 0.5% to US$3.83-¾ a bushel and August soy fell 0.4% to US$9.79-¼ a bushel.

Analysts expect the rally in wheat futures to continue next week on concerns that hot weather could hurt the quality and yields of the European crop. "For the September contract our target price is US$5.80 a bushel because profit-taking is going to be only short-term and next week its buying again," said Saito.

Canada's agriculture department lowered on Thursday its forecasts for the area farmers will harvest this autumn, as well as the size of their crops, after record spring rains flooded fields. As a result, exports of wheat, oats and rapeseed will all be smaller than last year.

But there was some easing of adverse weather in the US Midwest, where excess rains have threatened crop yields in the past weeks. The western US Midwest is turning clear after another round of showers on Wednesday, and mild temperatures will limit stress to corn as it enters pollination.