US Wheat Review on Monday: Falls hard on spillover, economic woes

 

 

Spillover pressure from outside and neighboring markets drove U.S. wheat futures sharply lower Monday as commodities tumbled on global economic woes.

 

Chicago Board of Trade December wheat fell 45 cents to US$5.95 1/4 a bushel. Kansas City Board of Trade December wheat sank 42 1/4 cents to US$6.28 1/4, and Minneapolis Grain Exchange December wheat lost 38 cents to US$6.64 3/4.

 

Limit-down losses in CBOT corn and soybeans weighed heavily on wheat, although wheat did not fall its daily 60-cent limit, traders said. Strength in the U.S. dollar was a bearish influence, as a firm greenback makes U.S. commodities more expensive for foreign buyers, they said.

 

Sell-offs in crude oil and financial markets were other bearish influences, traders said. Crude oil is connected to the grains because funds often trade in a basket of commodities and because corn is used to make ethanol.

 

The session low for CBOT December wheat was US$5.88, the lowest price for a nearby contract on a monthly continuation chart since July 2007. Commodity funds sold an estimated 4,000 contracts at the CBOT, a trader said.

 

"Everything's weighing on us," a CBOT wheat trader said.

 

Commodities in general were pounded by fears over a global spread of the U.S. credit crisis. The Dow Jones Industrial Average plunged more than 700 points, with the bellwether index falling below 10,000 for the first time in nearly four years.

 

 

Kansas City Board of Trade

 

KCBT wheat futures closed sharply lower. Pressure from turmoil in outside markets set the bearish tonnee for the day, traders said.

 

Fundamentals in the grain markets will be overshadowed by the outside influences until there is a sense of financial stability in the world, said Don Roose, president of U.S. Commodities in West Des Moines, Iowa. The U.S. Department of Agriculture is set to release an update on wheat planting in its weekly crop progress report, due out at 4 p.m. EDT, and to issue monthly crop reports Friday.

 

"The U.S. financial crisis has quickly spread to a world crisis," Roose said. "The dominant issue is the outside markets. I think that's just a big headwind."

 

 

Minneapolis Grain Exchange

 

MGE wheat futures closed lower with the other markets. Spillover weakness from the CBOT and from outside markets pushed prices lower, a trader said.

 

Fundamentals remain bearish for MGE wheat, a trader said. Last week, the USDA increased its estimate for U.S. spring wheat production, and Canada raised its all-wheat production forecast. The world is expected to produce a record wheat crop in 2008-09 due to mostly favorable weather and an expansion of acres by farmers looking to take advantage of high prices.