US Wheat Review on Wednesday: Slips on technicals, dollar, spillover
Technical weakness, spillover selling from other markets and a rally in the U.S. dollar pushed U.S. wheat futures lower Wednesday.
Chicago Board of Trade December wheat slipped 4 3/4 cents to US$7.25 3/4 per bushel. Kansas City Board of Trade December wheat dropped 8 cents to US$7.64, and Minneapolis Grain Exchange December wheat sank 9 1/4 cents to US$7.90.
Bears continued to have the technical advantage in wheat after sharp, recent sell-offs, analysts said. CBOT December wheat, which has closed lower for 10 of the last 12 sessions, hit a fresh 9-1/2-month low of US$7.16 before trimming losses.
Traders seemed reluctant to push the market too hard to the downside after the sell-off and ahead of the U.S. Department of Agriculture's September supply/demand report, traders said. Wheat seems to be finding "a little bit of a value level" at current prices, said Jason Britt, broker/analyst at Central State Commodities.
"I think you'll see some export trade start to develop," Britt said. "I wouldn't be surprised to see some sniffing around on business."
The markets didn't find any support from the results of an Egyptian tender. Egypt's state-owned General Authority for Supply Commodities bought 190,000 tonnes of French, Ukraine and Russian wheat, but none from the U.S.
"Egypt passed on us today," a trader said.
Strength in the U.S. dollar added pressure to wheat, as a firm dollar gives foreign importers less buying power, Britt said. The dollar hit a 12-month high against the euro.
Kansas City Board of Trade
A KCBT pit broker said traders were keeping an eye on CBOT December wheat and noted when it broke through support at US$7.18 1/2. However, the contract bounced back, and "it looks like support held," he said
The strengthening dollar and forecasts for record world wheat production weighed on the market, a KCBT trader said. The world is projected to produce a record crop after farmers worldwide expanded plantings to take advantage of high prices.
The USDA will update its estimates on world wheat production and on U.S. carryout in the supply/demand report, due out at 8:30 a.m. EDT Friday. Traders are stepping to the sidelines ahead of the report, the pit broker said.
Minneapolis Grain Exchange
MGE wheat closed lower with the other markets. Weakness in CBOT corn and soybeans and in crude oil added to the bearish tonnee.
There was a lack of fresh bullish news out for the markets to digest, a trader said. Statistics Canada pegged all-wheat stocks as of July 31 at 4.817 million tonnes, above trade estimates of 3.9 million to 4.2 million.
The USDA on Thursday will issue its weekly export sales report. U.S. wheat export sales for the week ended Sept. 4 are expected to be 250,000 to 450,000 tonnes.