US Wheat Review on Tuesday: CBOT prices sink near 2-week lows on glut

 

 

Wheat futures on the Chicago Board of Trade fell for the fifth consecutive session and ended near a two-week low on a supply glut and slow demand.

 

December soft red winter wheat fell 24 1/4 cents to US$5.33 a bushel, the lowest closing price since US$5.31 3/4 on Nov. 12. March wheat fell 25 cents to US$5.53 1/2.

 

Other wheat markets were lower as well. December hard red winter wheat on the Kansas City Board of Trade fell 24 1/2 cents to US$5.29 1/2 a bushel, while December hard red spring wheat on the Minneapolis Grain Exchange declined 22 cents to US$5.71 1/4.

 

Global wheat coffers are overflowing in the wake of bumper harvests in Ukraine and the Black Sea region of Russia, said Brett Boyer, director of research for Brock Associates in Milwaukee.

 

In the U.S., stockpiles are on track to be the highest in a decade while exports are projected to decline to a seven-year low. That means U.S. wheat is overpriced compared to elsewhere in the world, traders and analysts said.

 

"Domestically and globally, supply and demand fundamentals both favor lower prices," Boyer said. "There's plenty of wheat out there, and there's simply not enough demand to suck it up. Even with the weak dollar, U.S. wheat is overpriced."

 

At the end of the 2009-10 marketing year, U.S. wheat stocks will total 885 million bushels, the U.S. Department of Agriculture estimated earlier this month.

 

That would be up 35% from 2008-09 and the highest ending stocks since 950 million bushels in 1999-2000, when the average soft red winter wheat farm price was US$2.17 a bushel, according to the USDA.

 

That price is 59% below Tuesday's close for the CBOT December contract.

 

Cash soft red winter wheat in St. Louis for delivery in late November is currently about US$1.55 a bushel below CBOT December futures, an unusually wide gap, Boyer said.

 

The U.S. will export 875 million bushels of wheat in 2009-10, down 14% from 1.015 billion bushels in 2008-09 and the lowest export total since 2002-03, according to the USDA.

 

U.S. wheat is "way overpriced," said Vic Lespinasse of GrainAnalyst.com. "It has to come down further to make U.S. wheat competitive."

 

Speculative funds sold an estimated 4,000 wheat contracts, CBOT floor sources said.