US Wheat Review on Monday: Pulls back; Australia rain adds pressure
U.S. wheat futures sank Monday as the markets pulled back from gains last week amid losses in corn and bearish forecasts for favorable rains in the Southern Hemisphere.
Chicago Board of Trade December wheat sank 25 3/4 cents to US$8.64 3/4 per bushel. Kansas City Board of Trade December wheat dropped 23 cents to US$9.00, and Minneapolis Grain Exchange December wheat slipped 22 3/4 cents to US$9.29 1/4.
Traders took money off the table after wheat on Friday ended up on the week, a trader said.
Wheat's gains last week were "difficult to explain" for soft red winter wheat, traded at the CBOT, because importers have favored higher quality hard red winter wheat, said Chad Henderson, analyst for Prime Agricultural Consultants.
"We overdid, probably, last week's move and need to pull back some," he said.
CBOT December wheat last week spiked to an eight-week high of US$9.59 1/2, but bulls were unable to extend gains Friday.
Now, it seems bulls are technically "exhausted," an analyst said.
Monday's slump likely "sets a tonnee for most of the week," Henderson said.
CBOT December wheat closed below its 200-day moving average around US$8.81 but held the 100-day moving average around US$8.62.
"I think we've got a short-term high in," Henderson said. "I think we'll really struggle to rally back."
Projections for increasing world ending stocks are fundamentally bearish for wheat. The world is expected to grow more wheat than ever in 2008-09 thanks to expanded plantings and mostly favorable weather.
Kansas City Board of Trade
Expectations for rain in Australia's wheat areas weighed on wheat, along with profit-taking, a KCBT floor trader said. Forecasts are trending "quite a bit wetter" than last week, with New South Wales poised to receive 0.5 to 1 inch in the next six to 10 days, Cropcast Agricultural Weather said.
The rains will be "pivotal," as heading is expected to start in that time frame, Cropcast said. Australia's farmers are hoping for a strong crop this year after drought slashed wheat output Down Under for the past two years.
In Argentina, thunderstorms could bring rain to dry growing areas during the middle of the week, T-Storm Weather said. Northern Buenos Aires through Entre Rios is expected to see the heaviest totals, while chances across Cordoba are less certain, the private weather firm said.
Minneapolis Grain Exchange
Weakness in CBOT wheat and corn and in KCBT wheat dragged MGE wheat lower, a trader said. The market remains a follower, he said.
The USDA will issue an update on the spring wheat harvest in its weekly crop progress report, due at 4 p.m. EDT. Cutting should remain behind schedule, around 50% complete, up from 35% a week ago, Citigroup said.
Wet weather slowed cutting earlier in the season, but "it seems like things have been picking up there recently," Henderson said. The progress report is likely to be a "non-factor" for the market, he said.