US Wheat Review on Tuesday: Hits 1-month lows on spillover, harvest

 

 

Setbacks in other markets and the ongoing U.S. winter wheat harvest pressured U.S. wheat futures Tuesday, with nearby contracts sinking to their lowest prices in more than a month.

 

CBOT September wheat fell 7 cents to US$8.11 a bushel, while KCBT September wheat dropped 7 cents to US$8.44. It was the lowest close for each contract since June 9. Minneapolis Grain Exchange September wheat shed 5 cents to US$8.74 1/2, its lowest close since June 4.

 

Weakness in CBOT corn and soybeans and in crude oil weighed on wheat, traders said. Wheat lately has been following other markets, particularly corn, as both grains are used for animal feed.

 

"It looks to me like spillover selling as much as anything", said Alan Brugler, president of Brugler Marketing & Management, of the reason for wheat's losses.

 

Wheat also has a seasonal tendency to slip lower during the U.S. winter wheat harvest, said Tom Leffler, owner of Leffler Commodities. The U.S. Department of Agriculture said cutting was 62% complete as of Sunday, 8 percentage points behind average.

 

The markets expect a big crop from the U.S. and the world, due to mostly favorable weather and expanded plantings in some areas. The USDA last week estimated 2008-09 global wheat production at a record 664 million tonnes, up 1.3 million tonnes from its June estimate and 53 million tonnes higher than the weather-reduced 2007-08 crop.

 

"We still have harvest pressure going on, and we continue to see a wheat crop that's getting larger and larger," Leffler said.

 

Technically, CBOT and KCBT wheat are on track to test lows from late May now that they have made new lows for July, Leffler said. CBOT September wheat is eyeing a low of US$7.47, set on May 29.

 

There was some underlying support for the market from technical buying, traders said. Commodity funds sold an estimated 2,000 contracts at the CBOT.

 

 

Kansas City Board of Trade

 

KCBT wheat futures pulled back with CBOT corn and crude oil, a trader said. Harvest is almost complete in the southern Plains, including in Kansas, Oklahoma and Texas.

 

KCBT September wheat's next downside target is to take out a low of US$7.95, set on May 29, an analyst said. The market is "just trying to go back and retest those lows that we thought might have been the harvest lows," he said.

 

News that Iraq's Grain Board has bought some 300,000 metric tonnes of U.S. hard red winter wheat for delivery in September wasn't "any surprise for the market," Leffler said. Traders also shrugged off a purchase of 240,000 tonnes of wheat by Egypt because it was optional origin and in store, an analyst said.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures slipped on pressure from the other wheat markets, a trader said. An unexpected decline in the USDA's good-to-excellent rating for spring wheat was seen as mildly friendly and provided underlying support, traders said.

 

The USDA rated 61% of the spring wheat crop as good-to excellent as of Sunday, down 8 percentage points from the previous week, amid reports of unfavorable dryness in parts of the northern Plains. The USDA last week pegged spring wheat production below market expectations at 507 million bushels, compared with the average of analysts' estimates of 537 million.