June 8, 2011

CBOT wheat falls as Southern US harvest accelerates

CBOT wheat fell to a three-week low on speculation that yields may be better than expected in the southern Great Plains of the US as farmers step up the harvest of crops planted last year.

About 10% of the winter-wheat crop was harvested as of June 5, more than the 6% average in the previous five years, the USDA said yesterday. Central Kansas hasn't been as dry as areas further south and west, boosting prospects for output, said Darrell Holaday, the president of Advanced Market Concepts in Manhattan, Kansas.

"The yields in northern Oklahoma and central Kansas are coming in better than anticipated, and I think that's spooking the market a little bit," Holaday said "Central Kansas continues to show some promise. The southwest will be as bad as everybody thought, maybe worse, but you can add a lot of bushels in other parts of the state."

Wheat futures for July delivery dropped 10.25 cents, or 1.4 %, to settle at US$7.3375 a bushel on CBOT. Earlier, the price touched US$7.3125, the lowest for a most-active contract since May 16. The grain has jumped 70% in the past year as adverse weather threatened production in the US, Europe, and China.

On the Kansas City Board of Trade, wheat futures for July delivery dropped 15.5 cents, or 1.7%, to US$8.745 a bushel. Yesterday, the price declined by 2.7%. The commodity has surged 89% in the past 12 months.

Winter wheat is planted in the Great Plains and Midwest starting in September, goes dormant until March and is typically harvested beginning in June.

In Kansas, the largest US grower behind North Dakota, 11% of crops were mature, ahead of the five-year average of 6%, the USDA said yesterday. Parts of southern and western Kansas had less than half of the normal amount of rain in the past 60 days, according to the National Weather Service.

Farmers in south-central Kansas have begun "one of the earliest wheat harvests in recent memory," Kansas Wheat, a trade group, said in a statement yesterday. Crops near the Oklahoma border in Kiowa, Kansas, were reported to be "better than expected," the Manhattan, Kansas-based organization said.

"Harvest usually pressures the market this time of year," said Larry Glenn, an analyst at Frontier Ag in Quinter, Kansas. "In the southern part of Kansas, they're starting to get the combines rolling."

Wheat is the fourth-largest US crop, valued at US$13 billion in 2010, behind corn, soy, and hay, government figures showed.