US Wheat Review on Monday: Drops on weak CBOT corn, harvest pressure
U.S. wheat futures ended in negative territory Monday on spillover pressure from weak Chicago Board of Trade corn and expectations for a big crop from the ongoing winter wheat harvest.
CBOT September wheat fell 12 3/4 cents to USUS$8.18 per bushel. Kansas City Board of Trade September wheat shed 13 1/2 cents to USUS$8.51, and Minneapolis Grain Exchange September wheat tumbled 17 cents to USUS$8.79 1/2.
Steep losses in Corn, which has been providing direction for wheat lately, weighed on wheat, traders said. Corn and wheat are linked because both are used for animal feed.
"Corn for sure has pulled wheat down," said Doug Houghtonne, analyst for Brock Associates.
Cutting of the U.S. winter wheat crop was another bearish factor, as the U.S. Department of Agriculture on Friday raised its forecasts for soft red winter wheat and hard red winter wheat production from a month ago. The USDA will issue an updated estimate on harvest progress at 4 p.m. EDT.
Along with a strong U.S. crop, the USDA is predicting a record world wheat crop, which is seen as fundamentally bearish. Global 2008-09 wheat production is projected at 664 million tonnes, up 1.3 million tonnes from last month and 53 million tonnes higher than the weather-reduced 2007-08 crop.
Wheat gave back gains after rising Friday on technical buying and short-covering. An "outside day" in CBOT September wheat Friday indicates that the market has some support at its current price level, but fresh selling could be triggered if the contract falls below Friday's low of USUS$8.12, Houghtonne said.
Commodity funds sold an estimated 2,000 contracts at the CBOT.
Kansas City Board of Trade
KCBT wheat futures felt pressure from weakness in CBOT corn, a floor trader said. Winter wheat areas of the central Plains have mostly favorable weather for harvest activity this week, according to DTN Meteorlogix.
"Temperatures will be in the 90s Fahrenheit, which will allow for high grain quality and brisk harvest progress," Meteorlogix said.
Wheat will take some direction Tuesday from the results of a tender from Egypt's state-owned General Authority for Supply Commodities for at least 55,000 to 60,000 metric tonnes, traders said. The wheat is for shipment Aug. 10-20 on a free-on-board basis.
Minneapolis Grain Exchange
MGE wheat futures slipped along with CBOT and KCBT wheat. The market pulled back after Friday's gains, a trader said.
The Northern Plains are due for some wet weather this week, which should be favorable to dry spring wheat areas, traders said. Parts of western North Dakota and Montana are in need of rain.
The USDA, in the weekly crop progress report, is expected to keep its good-to-excellent rating for U.S. spring wheat unchanged or lower it by as much as 2 percentage points, an analyst said. A week ago, 69% of the spring wheat crop was rated good to excellent.