December 2, 2010

CBOT crops drop as investors cash in gains from rally
 
 

CBOT wheat decreased from its peak price in almost a month and corn and soy also fell as investors locked in gains after Wednesday's (Dec 1) rally.

March-delivery wheat declined as much as 1% to US$7.325 a bushel on CBOT after yesterday. It jumped as much as 7.9% to the highest price since November 12. The contract was at US$7.39 a bushel.

However, investors and importers still remain concerned about the global supply of high-quality wheat used in food as import demand expands and help to sustain the rally, analysts said.

High-quality wheat may be in short supply in the 2010-2011 season after rain hurt crops in Australia and Europe while dry weather stopped production in Russia, analysts said on Wednesday (Dec 1).

Wet weather in eastern Australia has postponed harvesting, with southern New South Wales and Victoria getting more than 100 millimetres (3.9 inches) of rain in November which is three times more than the normal amount, another analyst said.

As much as 30% of the crop in New South Wales, Australia's biggest wheat-producing state, may be downgraded to feed grade which is suitable only for animals because of excessive rain, said the third analyst. In the US, dry weather in the western Great Plains has threatened winter crops.

Feed volumes could reach 20%-30% of the state's crop, estimated at 9.2 million tonnes, compared with 4%-5% normally, he said.

While some wheat in Australia's east may be downgraded to feed quality because of excess rain, low rainfall in Western Australia during the growing season caused devastating losses and a very poor harvest in the country's top producing state, according to Martell.

Higher-quality grain from France and the UK is flying off the shelf after a super-wet harvest in Germany, Poland, the Czech Republic, Slovakia, and Hungary this year damaged wheat quality in those countries, Martell said.

Corn for March delivery lost 0.9% to US$5.61 a bushel after closing 4.1% more yesterday (Dec 1). January-delivery soy slipped 0.4% to US$12.775 a bushel, after advancing 3.2% yesterday (Dec 1).