US Wheat Review on Monday: Sinks on firm dollar, quiet export front

 

 

Strength in the U.S. dollar, a lack of export business and bearishness about a large world crop pressured U.S. wheat futures to nine-month lows Monday, with prices settling near session lows.

 

Chicago Board of Trade December wheat stumbled 7 3/4 cents to US$7.43 3/4 a bushel. Kansas City Board of Trade December wheat fell 10 1/4 cents to US$7.84 3/4, while Minneapolis Grain Exchange December wheat slipped 8 1/4 cents to US$8.07.

 

Wheat chopped around during the session before sliding at the close. CBOT December wheat hit a session low of US$7.42, its lowest price since Nov. 28.

 

The U.S. wheat export market was "very quiet," said Shawn McCambridge, analyst for Prudential Financial. Moving forward, wheat could find some technical support from ideas that recent sell-offs were overdone, although the markets "need to see something fundamental" to post solid gains, he said.

 

"The strength in the dollar and the need for export business are going to limit our upside potential," McCambridge said.

 

Indeed, the wheat markets will need to see fresh demand to spark a turnaround, said Larry Glenn, broker/analyst at Frontier Ag. It seems as though "the attitude is to sell rallies right now in all the grains," he said.

 

Longer-term downside projections point to the US$5.90 level for CBOT December wheat, which is "right at the top of the old trading range from summer of 2007," according to a research note from Spectrum Commodities. The first key support area is around US$7.10 and then US$6.40, it said.

 

 

Kansas City Board of Trade

 

KCBT December wheat closed just above its session low of US$7.82 1/2. The contract hit its lowest price since Nov. 30.

 

Fundamentals for wheat remain bearish amid expectations for increasing global ending stocks and record world production. The U.S. Department of Agriculture, in its September supply/demand report, is expected to increase its forecast for world wheat production by 2 to 3 million tonnes from its August estimate of 670.8 million tonnes, McCambridge said.

 

Increases are expected in the E.U., Ukraine and Canada, analysts said. The USDA report is due out at 8:30 a.m. EDT Friday.

 

"We know of the world's record wheat crop, but it's the constant upgrading of production estimates that keeps the buyers at bay," Spectrum Commodities said.

 

 

Minneapolis Grain Exchange

 

MGE wheat was a follower of the other markets, a trader said MGE December wheat closed at its session low of US$8.07, its lowest price since Dec. 5.

 

The spring wheat harvest is nearing completion, with 81% of the crop cut as of a week ago. The USDA is slated to update its estimate on harvest progress at 4 p.m. EDT in the weekly crop progress report.