US Wheat Review on Wednesday: Drops on regulation jitters, ample supply

 

 

Jitters about increased government regulation and bearishness about large global supplies pressured U.S. wheat futures Wednesday, although the markets closed well above session lows.

 

Chicago Board of Trade September wheat closed down 12 3/4 cents at US$5.22 a bushel, above its open outcry session low of US$5.14. Kansas City Board of Trade September wheat fell 11 cents to US$5.54 3/4, and Minneapolis Grain Exchange September wheat slipped 2 1/4 cents to US$5.98.

 

There are expectations the government will limit the involvement of index funds in wheat futures after the Commodity Futures Trading Commission Chairman Gary Gensler said Tuesday the agency would take aggressive measures to fix the market. Futures are supposed to converge, or come together, with cash prices when futures go into delivery to facilitate hedging, but cash wheat prices remained well below futures.

 

The CFTC chairman delivered his comments in testimony before the U.S. Senate's Permanent Subcommittee on Investigations. The CFTC also has its own subcommittee examining the lack of convergence in agricultural commodities, particularly CBOT wheat.

 

"That's obviously spooked everybody," said Jim Gerlach, president of AC Trading. Speculators are "not going to wait around to be shown the exit," he said. "They'll exit on their own."

 

Commodity funds sold an estimated 4,000 contracts at the CBOT. CBOT September wheat's open outcry session low of US$5.14 was its lowest price since July 8.

 

 

Kansas City Board of Trade

 

KCBT September wheat recovered 7 3/4 cents after hitting an open outcry session low of US$5.47. That was its lowest price since July 13.

 

Fundamentals for wheat look weak as global ending stocks are considered ample and demand for U.S. wheat has been dragging, analysts said. Egypt booked 60,000 tonnes of Russian wheat in a tender Tuesday and snubbed the U.S.

 

Recent rains helped boost crop prospects in Argentina, where plantings are down sharply due to dryness, meteorologists said. The country saw more rain during the past two days than it has "for many months" and is expected to have a wet spring, according to World Weather Inc.

 

The market should find some direction from weekly U.S. Department of Agriculture export sales data, due out at 8:30 a.m. EDT Thursday, traders said. U.S. wheat sales for the week ended July 16 are expected to be 300,000 tonnes to 550,000 tonnes.

 

 

Minneapolis Grain Exchange

 

MGE saw the most modest losses of the three U.S. wheat exchanges. September wheat closed 10 cents above its session low of US$5.88, which was its lowest price since March 4.

 

MGE may find support from ideas that the world will have large supplies of low quality wheat but tighter supplies of high quality wheat, an analyst said. Hard red spring wheat, traded at the MGE, is prized for its high protein content.