US Wheat Review on Friday: Falls on bailout delay, spillover pressure

 

 

U.S. wheat futures closed lower as a delay in the government's economic bailout package weighed on the markets ahead of the weekend.

 

Chicago Board of Trade December wheat dropped 20 1/4 cents to US$7.16 a bushel. Kansas City Board of Trade December wheat sank 19 1/2 cents to US$7.45 3/4, and Minneapolis Grain Exchange December wheat lost 16 cents to US$7.89 3/4.

 

Traders were reluctant to take on big positions before the weekend and without a rescue plan in place, an analyst said. The direction of the markets Monday will hinge on a deal being reached to rescue the financial sector, said Greg Wagner, a senior analyst for AgResource Company.

 

Lawmakers on Thursday seemed close to an agreement to enable the U.S. Treasury to buy up to US$700 billion in soured credit bets. However, negotiations broke down Thursday evening.

 

"I think next week much is going to depend on the resolution," Wagner said.

 

Commodity fund-selling of an estimated 3,000 contracts added pressure to wheat in thin volume, floor traders said. Traders moved to the sidelines this weak amid concerns about the economy.

 

There was a negative tonnee across the CBOT grains floor. CBOT corn and soybeans slid, pressuring wheat, a trader said. Crude oil also was weaker.

 

"Everything's just sort of feeding on each other," a CBOT floor broker said.

 

CBOT December wheat closed below its 10-day moving average, which was around US$7.22, a trader said. The contract is below all the major moving averages.

 

 

Kansas City Board of Trade

 

Uncertainty about the economy pressured KCBT wheat amid a lack of fresh fundamental news, a trader said. There is sentiment that demand needs to pick up after Iraq and Egypt snubbed the U.S. in tenders this week and bought wheat from Russia.

 

The U.S. Department of Agriculture at 8:30 a.m. EDT Tuesday is slated to issue its quarterly grain stocks and small grains reports, which could provide the markets some direction, an analyst said. The stocks estimate is important because it provides an indication of wheat usage, including summer feed use.

 

The average of analysts' estimates for wheat stocks as of Sept. 1 is 1.932 billion bushels, up from 1.717 billion last year, according to a survey of 13 analysts by Dow Jones Newswires. Stocks are expected to rise from last year due to increased production.

 

 

Minneapolis Grain Exchange

 

Weakness in CBOT wheat, corn and soybeans was a bearish influence on MGE wheat, a trader said. The MGE remains a follower of other markets.

 

Analysts generally expect the USDA to trim its all wheat production estimate from last month in the small grains report. The average of analysts' estimates for 2008-09 all wheat production was 2.459 billion bushels, down slightly from the USDA's August estimate of 2.462 billion but up from 2.067 billion last year.