US Wheat Review on Friday: Slides on spillover pressure, setback
U.S. wheat futures Friday erased Thursday's gains as the markets retreated amid pressure from weakness in other markets and strength in the dollar.
Chicago Board of Trade December wheat tumbled 31 3/4 cents to US$8.90 1/2 per bushel, up 41 1/4 cents on the week. Kansas City Board of Trade December wheat lost 27 3/4 cents to US$9.23, up 38 cents on the week. Minneapolis Grain Exchange December wheat dropped 30 1/4 cents to US$9.52, up 29 1/2 cents on the week.
Wheat had room to pull back ahead of the weekend after rising earlier in the week, a CBOT trader said. The markets slumped along with CBOT corn and soybeans and with crude oil. Commodity funds sold an estimated 2,000 wheat contracts at the CBOT.
Wheat's poor close Thursday opened the door for the markets to slide Friday, said Louise Gartner, analyst for Spectrum Commodities. CBOT December wheat closed 37 1/4 cents off its high Thursday after briefly soaring to the daily, exchange-imposed limit of 60 cents.
"The market rallied up and tested the June high" Thursday, Gartner said. "Technically we got close enough to test it. It didn't close well. We were due for a correction just because of that."
Wheat could take another run at its June high, but has likely seen a long-term peak if it does not retest that level, Gartner said. CBOT December wheat hit a high Thursday of US$9.59 1/2, compared to its June high of US$9.92.
The June high offers "very tough resistance," Gartner said.
The spread between CBOT wheat and corn should narrow as the trade realizes the world is "not going to run out of quality wheat," Gartner said. Market chatter has pointed to concerns about poor-quality wheat in the Black Sea region and parts of the E.U.
CBOT December corn fell 11 cents to US$6.06 1/2.
Kansas City Board of Trade
KCBT wheat futures sank in a setback from Thursday's rally. There were ideas the gains were overdone, traders said, and losses in other markets added to the bearish tonnee.
Concerns persist about dryness in Southern Hemisphere wheat areas. A new cold air mass moving into Australia's eastern wheat belt should keep growth rates for wheat slower than normal, DTN Meteorlogix said.
September is a key month for wheat growth Down Under and rains will be needed to reach the U.S. Department of Agriculture's forecast of 25 million tonnes, said Brian Henry, broker for Archer Financial Services. The last few crop failures in Australia have developed in late August and September, he noted. Severe drought has slashed Australia's production for the past two years.
Minneapolis Grain Exchange
MGE spring wheat futures should continue to lose ground to the other wheat markets; probably more so to CBOT wheat than KCBT wheat, Henry said. A 20- to 25-cent premium of MGE wheat to KCBT wheat may result in profit-taking on short MGE/long KCBT spreads, he said.
Contracts in MGE will continue to take their lead from the other markets as harvest continues and probably into late fall, Henry said. Spring wheat cutting is behind the normal pace, but a lot of progress was made this week as warm temperatures and dry conditions allowed harvest to move into "full swing," he said.