August 17, 2007

 

US Wheat Review on Thursday: Staggers lower in broad-based sell-off

 

 

U.S. wheat futures sank Thursday under spillover pressure from steep losses in soybeans and outside markets, despite a bullish weekly export sales report, analysts said.

 

Chicago Board of Trade September wheat closed 5 1/2 cents lower at US$6.73 per bushel, the contract's lowest close since Aug. 13. CBOT December wheat ended down 9 1/2 cents at US$6.87 1/2 per bushel, the contracts lowest close since Aug. 10.

 

Kansas City Board of Trade September wheat finished 7 1/4 cents lower at US$6.50 3/4, and KCBT December wheat settled 11 3/4 cents lower at US$6.64. Minneapolis Grain Exchange September wheat ended down 8 1/2 cents at US$6.55, and MGE December wheat dropped 10 1/4 cents to US$6.60 1/2.

 

Along with wheat, CBOT soybeans and corn also tumbled under the weight of losses in equities, metals and energy markets, traders said. CBOT soybeans, in particular, pressed on wheat as soy prices fell limit down, or 50 cents lower, before trimming losses, they said.

 

"Outside market influence is the dominant factor in all of these markets," said Dave Marshall, an independent marketing advisor and commodities broker in Nashville, Ill. "Pick a commodity, any commodity. They've all been beaten up."

 

Commodity funds sold an estimated 3,500 wheat contracts at the CBOT. In CBOT pit trades, Rand Financial sold 700 Sep.

 

Wheat futures slumped even though the U.S. Department of Agriculture reported weekly export sales figures that topped trade estimates. Sales for the week ended Aug. 9 totaled 1.186 million metric tonnes, well above analysts' expectations of 300,000 to 500,000 tonnes.

 

Weekly wheat export sales have been strong for four consecutive weeks now, analysts said. Export sales should top 1 million tonnes again next week as the latest report didn't include a sale of 415,000 tonnes of U.S. soft red wheat to Egypt announced Tuesday, a CBOT floor trader said.

 

"We pretty much ignored another very, very strong export sales report," Marshall said.

 

The U.S. continues to see strong demand amid production problems in Europe and the Black Sea region, traders said.

 

Strategie Grains Thursday forecast the 2007-08 European Union soft wheat crop at 114.1 million tonnes, down 4.8 million tonnes from the July estimate and a drop of 2% million from last year's crop. Traders said the cut was generally in line with trade expectations.

 

Showers and thundershowers covered England, France, Germany and the Benelux countries of Belgium, Luxembourg and the Netherlands on Wednesday, according to DTN Meteorlogix. Rainfall delays any harvest activities for winter and spring grains.

 

In Argentina, meanwhile, another very cold air mass is expected in the southern wheat belt Thursday and Friday, Meteorlogix said. The event should cause another widespread freeze, which is unfavorable for wheat, the weather firm said.

 

 

Kansas City Board of Trade

 

Weakness in global equity markets and the commodity-wide sell-off dragged down KCBT wheat futures, a KCBT floor trader said.

 

"CBOT soybeans took a swan dive," he said. "We followed along."

 

Amid the broad-based selling, it seemed as though the market temporarily shrugged off warnings that the Australian wheat crop may be shrinking due to dryness, instead of getting bigger, an analyst said. Wheat areas of Australia will have a few significant showers during the next five days, but rainfall so far has been "disappointing," according to Meteorlogix.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures were a follower of weakness in all the other commodity markets, particularly CBOT soybeans, a floor trader said. Wheat attempted a late recovery as the stock market bounced off its lows, he added.

 

In other news, Bolivia froze all wheat exports amid rising food prices. The country's government is seeking to purchase 100,000 tonnes of wheat flour from Argentina this year, and the first shipment arrived earlier this week.