August 28, 2008


US Wheat Review on Wednesday: Extends losses on technicals, big crop



Technical selling and bearishness about hefty world supplies drove U.S. wheat futures sharply lower Wednesday.


Chicago Board of Trade December wheat fell 28 3/4 cents to US$8.25 3/4 per bushel. Kansas City Board of Trade December wheat dropped 25 cents US$8.63, and Minneapolis Grain Exchange sank 21 3/4 cents to US$8.88 1/2.


Wheat closed lower for the fourth straight session after making an unsuccessful run at June's highs last Thursday. The markets have likely put in a near-term top following the rally, analysts said.


Projections for record world production in 2008-09 and forecasts for rain in the Southern Hemisphere continued to hang over the markets. The U.S. Department of Agriculture sees global production at 670.75 million tonnes, up from 610.54 million tonnes in 2007-08, due to expanded plantings and mostly favorable weather.


Producers expanded wheat seedings to take advantage of high prices, and the global crop seems like it's "getting bigger by the hour," said Sid Love, analyst for Kropf & Love Consulting. Russia, for one, recently raised its forecast for grain production from earlier this year.


"We got those huge prices (and) everybody in the world planted," Love said. "It just made sense."


Losses accelerated during the day as CBOT December wheat dropped below major moving averages, traders said. Commodity funds sold an estimated 3,000 contracts at the CBOT.


"I have a hard time finding anything bullish in the wheat market," said Tom Leffler, owner of Leffler Commodities. "I think it overextended itself technically last week."


Wheat could potentially see a technical bounce after the four-day sell-off, an analyst said. However, trading is expected to be "very unpredictable" ahead of the three-day Labor Day weekend, the end of the month and first notice day for September contracts Friday, he said.



Kansas City Board of Trade


KCBT wheat futures extended recent losses amid bearishness about beneficial moisture in Australia and Argentina, a floor trader said. There was a lack of fresh bullish news to spark a turnaround.


"Rain in Argentina and Australia are boosting conditions for wheat, especially in the Australian state of New South Wales, where moderate rains are expected to help the soil-moisture picture," DTN Meteorlogix said.


The U.S. hard red winter wheat crop should get off to a good start after recent rains boosted soil moisture in the U.S. Plains, said Drew Lerner, president of World Weather Inc. It is still a bit too early for market participants to talk about planting, a KCBT trader said.


"The High Plains region is in amazingly good condition," Lerner said. Small pockets of dryness remain in northern Oklahoma and southern Kansas, but they are "not really significant because we're really just at the tip of the planting season," he said.



Minneapolis Grain Exchange


MGE wheat futures were "basically chasing Chicago lower," an MGE floor trader said. Expectations are for downward pressure to continue, as it seems as though domestic millers are taking care of needs with hard red winter wheat and aren't scrambling for hard spring wheat to blend, a trader said.


Producer selling remains slow. It seems as though growers are putting grain in elevators for storage but not releasing it to managers, an MGE trader said.


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