US Wheat Review on Monday: Tumbles on limit-down CBOT corn pressure

 

 

Limit-down losses in Chicago Board of Trade corn shoved U.S. wheat futures sharply lower Monday amid a broad-based sell-off of commodities.

 

Chicago Board of Trade September wheat sank 51 1/2 cents to US$8.36 per bushel. Kansas City Board of Trade September wheat dropped 52 1/4 cents to US$8.60, and Minneapolis Grain Exchange September wheat slid 53 1/4 cents to US$8.84 3/4.

 

Wheat is a follower, and "its fate is tied to corn right now," said John Kleist, broker/analyst at Allendale. The grains are linked because they are both used for animal feed.

 

CBOT corn fell its daily, exchange-imposed limit of 30 cents on forecasts for favorable weather in the Midwest. CBOT November soybeans sank the exchange-imposed limit of 70 cents, and crude oil was also down.

 

CBOT and MGE September wheat briefly tumbled the 60-cent limit during the day session but trimmed losses. Wheat didn't lock limit down because wheat prices aren't trading at historic highs like corn and soybeans, Kleist said.

 

"Wheat was high priced but not at historic highs," he said.

 

Wheat likely wiped through sell stops early in the session on its way deep into negative territory, Kleist said. There is a convergence of major moving averages - including the 45-day, 50-day and 200-day - on technical charts for CBOT September wheat, and the contract should find fairly strong technical support between US$8.42 1/2 and US$8.36 1/2, he said.

 

In other news, there was some market chatter about a drought in Iraq, which last week issued a tender to buy at least 50,000 metric tonnes of optional-origin wheat. However, the dryness concerns aren't a big deal because the world has a lot of wheat to go around, Kleist said.

 

 

Kansas City Board of Trade

 

Setbacks in CBOT corn and in outside markets, such as crude oil, were bearish for KCBT wheat, a floor trader said. The advancing U.S. winter wheat harvest added pressure to the market, he said.

 

Kansas' wheat harvest is all but finished in southern parts of the state after a weekend of "cooperative weather," according to a report from Kansas Wheat, a producers' group. Cutting is more than half complete in northwestern Kansas, the group said.

 

The U.S. winter wheat harvest is expected to be 50% to 51% complete in the U.S. Department of Agriculture's weekly crop progress report, due out at 4 p.m. EDT, traders said. A week ago, the harvest was 36% complete, below the average of 48%.

 

 

Minneapolis Grain Exchange

 

MGE wheat was a follower of CBOT wheat and corn, traders said. There are no major concerns about U.S. spring wheat in the northern Plains after recent rains gave the crop a drink of water in the Dakotas, they said.

 

Good-to-excellent ratings for U.S. spring wheat are expected to be unchanged to up 2 percentage points in the USDA's progress report. A week ago, 74% of the crop was rated as good to excellent.

 

Market participants are starting to look ahead to the release of the USDA's July supply and demand data, due out Friday, a MGE floor trader said. Traders want to see estimates for spring wheat production, he said.