August 16, 2008

 

US Wheat Review on Friday: Sinks on spillover pressure, firm dollar

 

 

U.S. wheat futures sank Friday on spillover pressure from steep losses in other markets and a rally in the greenback.

 

Nearby Chicago Board of Trade September wheat dropped 40 1/4 cents to close at US$8.24 1/4 per bushel, up 59 cents on the week. Kansas City Board of Trade September wheat fell 34 3/4 cents to US$8.63 1/4, up 59 1/2 cents on the week. Minneapolis Grain Exchange September wheat slid 42 1/4 cents to US$9.12 1/4, up 54 1/4 cents on the week.

 

Setbacks in CBOT corn and soybeans, which both briefly tumbled their daily, exchange-imposed limits, weighed on wheat, traders said. Commodity funds were liquidating and sold an estimated 4,000 wheat contracts at the CBOT.

 

A sell-off in crude oil was bearish for the grains. Crude futures slid to a fresh 3 1/2-month low as a report indicated world stockpiles will grow and the stronger dollar chased investment funds out of commodities.

 

CBOT wheat had room to pull back after surging by its daily, 60-cent limit Wednesday and extending gains Thursday, an analyst said. Trading is likely to remain volatile, with big price swings expected from day to day, a CBOT floor trader said.

 

CBOT December wheat looked as though it had "solid support" in the area of US$8.50 to US$8.60, said Jerry Gidel, analyst for North America Risk Management Services. The contract sank 40 1/4 cents to US$8.49 1/4, up 59 cents on the week, and a close below US$8.45 would have opened the door for a slide to US$8.20 early next week, he said.

 

Forecasts for record world wheat production in 2008-09 and expanding global ending stocks continue to hang over the markets. Losses in corn and soybeans also have kept a lid on wheat lately, he said.

 

 

Kansas City Board of Trade

 

KCBT wheat futures closed lower on pressure from the sharp decline in crude oil and strength in the U.S. dollar, a floor trader said. The outside factors overshadowed news that Iran bought 689,310 tonnes of U.S. hard red winter wheat, including 199,310 tonnes that were previously reported as being sold to unknown destinations.

 

Egypt's state-owned General Authority for Supply Commodities, or GASC, bought 155,000 metric tonnes of Russian and Ukraine wheat in a tender and none from the U.S. The wheat is for shipment on Sept. 16-30.

 

"There's really no bullish information that's going to help keep support here," the trader said. "It seems like crude and the dollar have been having their way with commodities."

 

Rainfall totaling two inches or more is in store for U.S. southern Plains crop areas this weekend, DTN Meteorlogix said in a forecast. The moisture will be "very beneficial" ahead of winter wheat planting, the private weather firm said.

 

 

Minneapolis Grain Exchange

 

The weakness in energy and the firm U.S. dollar were bearish for MGE wheat, a trader said. MGE followed the neighboring and outside markets to the downside, he said.

 

Spring wheat producers didn't make much progress with harvest this week due to wet weather in the northern Plains, although warmer, drier conditions next week should allow them to return to the fields. The U.S. Department of Agriculture's weekly crop progress report, due out Monday, should show harvest around 35% complete, up from 16% as of Aug. 10, the executive director of the South Dakota Wheat Commission said. The marketing specialist for the North Dakota Wheat Commission predicted that harvest would be roughly 30% complete.

 

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