US Wheat Review on Monday: Falls for fourth day on abundant supplies

 

 

Wheat futures on the Chicago Board of Trade fell for the fourth consecutive session Monday on abundant supplies, lackluster demand and weakness in other markets.

 

December CBOT wheat futures fell 1 1/4 cents to US$4.56 a bushel, after rising earlier to US$4.63. December Kansas City Board of Trade wheat declined 3 cents to US$4.69, and December Minneapolis Grains Exchange wheat fell 3 1/2 cents to US$4.93 1/4.

 

The lack of a frost threat and prospects for record or near-record crops in the U.S. Midwest continued to pull down corn and soy futures, with November soy tumbling 27 1/2 cents.

 

Wheat is "getting a downdraft from the other markets," said Joel Karlin, a market analyst with Western Milling in Goshen, Calif.

 

Additionally, wheat is "probably the most bearish of the CBOT markets," Karlin said. "You have bountiful supplies of world and U.S. wheat and tepid demand. And the early-season prognosis for crops in the southern hemisphere is good."

 

Earlier this month, the U.S. Department of Agriculture hiked its estimate for global wheat ending stocks for the 2009-10 marketing year to 186.6 million metric tonnes, up 1.6% from an August projection and up 10% from the previous year.

 

U.S. wheat ending stocks in 2009-10 will rise to 743 million bushels, up 11% from 667 million in 2008-09, according to USDA.

 

The hard red spring wheat crop in the northern U.S. Plains benefited from favorable growing conditions, meaning the government's production estimate probably will be revised higher, Karlin said.

 

Traders expect the USDA, in its small grains summary scheduled Sept. 30, to increase its estimate for "other" U.S. spring wheat production this by 30 million to 40 million bushels, Karlin said.

 

In the Sept. 11 crop production report, the USDA forecast a crop of 548.3 million bushels.

 

Earlier Monday, December wheat failed to breach technical support in the US$4.50 to US$4.52 area, triggering a brief short-covering rally, said Vic Lespinasse of GrainAnalyst.com.

 

The December wheat futures in Chicago reached a life-of-contract low of US$4.50 Sept. 15, a decline of 38% from this year's high of US$7.25 1/4 on June 1. Some analysts see further downside.

 

"Chicago wheat could drop to the US$4 level if corn really took a major tumble," Karlin said.

 

Despite declining for much of the past three months, U.S. wheat remains expensive compared to other world markets such as Russia and Ukraine, said Mike O'Dea, a risk management consultant with FCStonnee LLC, in Kansas City.

 

"We have plenty of supply," O'Dea said. "We just need to find export demand. It needs to come from the export market, because we can't use this wheat domestically."