July 12, 2011
US wheat slumps on rallying dollar, shrinking demand
Concerns that demand for US exports will shrink as Europe's fiscal woes threaten global growth, as well as a strengthening US dollar, has caused US wheat to drop severely this month.
Stocks declined around the world and the dollar climbed to a six-week high against a basket of six currencies on speculation that Europe's debt crisis will spread to Italy. About 21.1 million bushels of wheat were inspected for export in the week ended July 7, down 17% from a week earlier, the US Department of Agriculture (USDA) said.
"The outside markets are playing a role, with equities weaker, the dollar stronger and energies down a bit," said Frank Cholly Sr., a senior market strategist at Lind-Waldock in Chicago. "There's concern that the Euro-zone debt crisis is going to spread, and we also saw China's inflation report over the weekend," indicating demand may slow, he said.
Wheat futures for September delivery dropped US$0.12, or 1.8%, to settle at US$6.3925 a bushel on the Chicago Board of Trade (CBOT), the biggest loss since June 30.
Prices also fell on signs that countries around the world will boost output. The USDA may report in its monthly World Agricultural Supply and Demand Estimates (WASDE) report that US and world wheat inventories before next year's harvest will be larger than forecast last month, according to a Bloomberg News survey.
"It's going to be interesting to see what kind of numbers the USDA throws out," said Tom Leffler, the owner of Leffler Commodities LLC in Augusta, Kansas.
India, the world's largest grower after China, is considering lifting a four-year prohibition on exports after a record harvest in the past year. Russia, which ended a ban on shipments July 1, may produce as much as 92 million tonnes of grain this year, according to Moscow-based researcher SovEcon.
The US is the world's leading exporter of wheat. The grain is the nation's fourth-largest crop, valued at US$13 billion in 2010, behind corn, soy, and hay, government data show.
