US Wheat Review on Friday: Falls on economic woes, spillover selling

 

 

U.S. wheat futures were swept deep into negative territory Friday on fear about the global economic crisis and pressure from limit-down losses in neighboring markets.

 

Chicago Board of Trade December wheat sank 41 1/4 cents to US$5.63 1/2 a bushel, down 76 3/4 cents on the week. Kansas City Board of Trade December wheat dropped 33 cents to US$6.05, and Minneapolis Grain Exchange December wheat lost 37 1/2 cents to US$6.39 1/4.

 

Wheat closed lower with CBOT corn and soybeans, which both dropped their daily, exchange-imposed limits. Spillover selling from the neighboring markets kept wheat on the defensive, a trader said.

 

The slide in financial markets and in the grains "is all tied together, for better or for worse," said Dave Marshall, an independent marketing advisor and commodities broker.

 

The U.S. Department of Agriculture's October supply/demand report contained some bearish data for wheat, a trader said. The agency raised its projections for 2008-09 U.S. wheat carryout and for global wheat production.

 

However, fundamentals continued to be overshadowed by the financial markets, a trader said. Traders will remain reluctant to buy grain futures amid ongoing volatility in the financial sector, an analyst said.

 

"Confidence is something that's lacking in all the markets right now," a broker said. "It's been a tough week."

 

CBOT December wheat hit a session low of US$5.58, the lowest price for a nearby contract on a monthly continuation chart since June 2007. Commodity funds sold an estimated 3,000 contracts at the CBOT.

 

 

Kansas City Board of Trade

 

KCBT wheat fell on spillover pressure from CBOT corn and soybeans, which were locked limit down for most of the day session, a trader said. Ongoing uncertainty and panic in financial markets is keeping traders on the sidelines, he said.

 

"Everybody's just exiting," said Larry Glenn, a broker/analyst for Frontier Ag. "I don't know where they're going with their money - a tin can in the back yard, maybe."

 

The supply/demand report raised the government's estimate for 2008-09 wheat carryout to 601 million bushels from 574 million. Many analysts had expected to see a decrease in carryout due to strong feed use and export demand.

 

The USDA said global wheat production is projected at a record 680.2 million tonnes, up 3.9 million from September. The world is expected to produce more wheat in 2008-09 than ever before after producers worldwide expanded seedings to take advantage of high prices.

 

 

Minneapolis Grain Exchange

 

The global economic turmoil and sell-off in CBOT corn and soybeans knocked MGE wheat futures sharply lower. There are uncertainties about global demand for commodities amid concerns about a slowdown in the global economy, an analyst said.

 

"There is still a question on the demand side, with this economic turmoil going on, that the markets are still trying to rectify," an analyst said.

 

Outside and financial markets will need to stabilize before the grains are able to trade their own fundamentals, a trader said.