US Wheat Review on Wednesday: Stumbles in setback amid outside pressure

 

 

Chicago Board of Trade December wheat sank 10 1/4 cents to US$6.69 3/4 a bushel. Kansas City Board of Trade December wheat dropped 8 cents to US$7.04, and Minneapolis Grain Exchange December wheat lost 8 1/4 cents to US$7.38 1/2.

 

There was a lack of follow-through buying after wheat rose Tuesday on short-covering and bullishness about a lower-than-expected quarterly stocks estimate from the U.S. Department of Agriculture. An absence of fresh supportive news weighed on the markets, an analyst said.

 

Some unwinding of wheat/corn spreads added pressure, said Brian Hoops, president of Midwest Market Solutions. Traders bought wheat and sold corn Tuesday, and "we're seeing a little bit of unwinding of that spread today," he said.

 

"You had the rally yesterday on the (quarterly) stocks, and now you're seeing the weakness on the spreading," Hoops said.

 

Strength in the U.S. dollar was a bearish influence on wheat, as a firm greenback gives importing countries less buying power, Hoops said. Competition for wheat export business has been tough on the world market lately due to expanded global production and aggressive selling by the Black Sea region.

 

"With the U.S. dollar higher, it makes the case that wheat should be lower," Hoops said.

 

Weakness in crude oil was another bearish factor, a trader said. Commodity funds sold an estimated 1,000 contracts at the CBOT.

 

Traders are keeping an eye on developments in Washington amid expectations the U.S. Senate will approve a US$700 billion financial bailout. The legislation is based on the package the House of Representatives narrowly defeated on Monday but includes some sweeteners.

 

If the Senate approves the bailout, "there will be pressure on the House to approve it," Hoops said. "That could ease a lot of the liquidation pressure" in the grains.

 

Kansas City Board of Trade

 

Strength in the U.S. dollar and technical weakness kept KCBT wheat on the defensive, a KCBT floor trader said. The market remains stuck in a weeks-old technical downtrend.

 

"A strong dollar doesn't help commodity prices," a KCBT floor trader said. "We've been in a bear run for a while here, and it's continuing."

  

Minneapolis Grain Exchange

 

MGE wheat futures closed lower with the other markets. The market will find some direction Thursday from Statistics Canada's wheat production estimate, an analyst said.

 

Statistics Canada is expected to peg production at 25.4 to 27.0 million tonnes, compared to its August estimate of 25.426 million, according to a Dow Jones Newswires survey. The estimate is due out at 8:30 a.m. EDT Thursday.