US Wheat Review on Thursday: Slides on pressure from outside markets
Sliding stocks and crude oil dragged U.S. wheat futures lower Thursday, as the grains continued to be dominated by outside influences.
Chicago Board of Trade December wheat closed down 14 3/4 cents at US$5.22 1/2 a bushel. Kansas City Board of Trade December wheat fell 13 3/4 cents to US$5.63, and Minneapolis Grain Exchange December wheat shed 10 cents to US$6.34.
Funds continuedto move investments out of commodities due to the global credit crush, an analyst said. Commodity funds sold an estimated 2,000 wheat contracts at the CBOT.
Grains were "getting hit by the stock market and the deleveraging still going on," said Alan Brugler, president of Brugler Marketing and Management. "I think that's the underlying theme. You're seeing some liquidation."
A rally in the U.S. dollar added pressure, as it means foreign countries have less buying power to import commodities, a CBOT floor analyst said. There are ideas U.S. wheat prices need to soften to be more competitive on the world export market, Brugler said.
Total weekly U.S. wheat export sales were 379,300 tonnes, at the low end of trade estimates. Sales for delivery in 2008-09 were 366,300 metric tonnes, down 20% from the previous week and 18% from the prior four-week average, the U.S. Department of Agriculture said.
"Of course we're not competitive on exports," Brugler said. "We keep being reminded of that. To a degree, you have to let the price go down to where we can move some more stuff."
Kansas City Board of Trade
KCBT wheat futures followed outside markets and the CBOT amid a lack of fresh news, a floor trader said. It was a "very quiet day" on the trading floor, she said.
The USDA on Monday will issue monthly crop reports, but they are expected to be more of an event for corn and soybeans than for wheat. The average of analysts' estimates for U.S. wheat carryoutin 2008-2009 is 594 million bushels, down from the USDA's October estimate of 601 million, according to a Dow Jones Newswires survey of 12 analysts.
Minneapolis Grain Exchange
Losses at the MGE were not as sharp as they were in Chicago or Kansas City. Firmer basis levels, or the difference between cash and futures prices, may have helped MGE gain on the other wheat markets, a MGE floor trader said. MGE's premium over CBOT and KCBT also appreciated on Wednesday.
There was talk on the trading floor about snow moving across North Dakota, a trader said. All the HRS wheat in the northern Plains has been cut for a while, but the storm could slow the corn harvest.
Once farmers start harvesting corn again, they will have to decide wheat to do with the wheat they have in store, the trader said. They will need to choose whether to sell the wheat or sell the freshly-cut corn, as storage space is limited.
The winter storm will give producers "more of an excuse to sit and wait and hope that [wheat] prices come back," the MGE trader said. MGE wheat prices are down sharply from early this year, when the nearby contract surged to a record US$25.