US Wheat Review on Tuesday: Drops on firm dollar, improved world crop

 

 

Strength in the U.S. dollar and improving world crop conditions weighed on U.S. wheat futures Tuesday.

 

Chicago Board of Trade December wheat slipped 10 1/4 cents to US$8.54 1/2 per bushel. Kansas City Board of Trade December wheat lost 12 cents to US$8.88, and Minneapolis Grain Exchange December wheat dropped 19 cents to US$9.10 1/4.

 

The firm greenback pushed down the grains, as gains in crude oil provided some underlying support, said Dave Marshall, an independent marketing advisor and commodities broker. Projections for increased world wheat production also continued to hang over the markets, traders said.

 

Russia's grain harvest, for one, is expected to reach at least 100 million metric tonnes this year, up from the 82 million tonnes harvested last year, according to the agriculture ministry. Earlier this year, the ministry forecast a harvest of at least 85 million tonnes.

 

"Wheat has struggled to rally this week as the world crop has just gotten larger," Marshall said. "I think wheat's been at the epicenter of this idea that the world's grain crop is not only getting larger, but we might have an adequate supply."

 

Commodity funds sold an estimated 3,000 wheat contracts at the CBOT, where corn and soybeans also ended modestly lower amid fund selling.

 

CBOT December wheat hit a session low of US$8.41 before trimming losses. It closed below its 100- and 50-day moving averages but above its 45-day moving average around US$8.53 3/4.

 

Trading is expected to be thin this week, with some market participants taking vacation days ahead of the Labor Day holiday Monday, an analyst said. That could lead to increased volatility.

 

"The tendency to overdo it in either direction is going to be more likely at this time of year," Marshall said.

 

 

Kansas City Board of Trade

 

Expectations that Australia and Argentina will see rains in wheat areas were seen as bearish. Light rains will fall in western and central growing areas Down Under during the next five to seven days, DTN Meteorlogix said.

 

Showers are expected during the next couple days in eastern Argentina, although more rain is needed in the west, Meteorlogix said. The private weather firm declared the wheat outlook for both countries is "positive."

 

The idea that the Southern Hemisphere could see an increase in production from previous forecasts, or maintain those projections, is "not all that friendly," a trader said. Drought has slashed output in Australia for the past two years.

 

 

Minneapolis Grain Exchange

 

The MGE saw some commercial buying early in the session, but producer selling remains light considering harvest is in full swing, a floor trader said. Harvest was 61% complete as of Sunday, down from the average of 72%, the U.S. Department of Agriculture said.

 

Producers are in no hurry to sell the spring wheat crop because they "have enough cash from last year," a MGE trader said. Nearby MGE wheat hit a record high of US$25 this spring.

 

"We were just kind of a follower here today," the MGE trader said. "We should be busier now."