October 27, 2008
US Wheat Outlook on Monday: Down 10-12 cents on outside market pressure
U.S. wheat futures are seen opening 10 to 12 cents lower after a weak overnight trade, with widespread commodity losses and an expected lower opening on Wall Street providing ongoing price pressure, traders said Monday.
Chicago Board of Trade December wheat overnight fell 10 1/4 cents to US$5.06 per bushel.
Funds continue to deleverage, taking any unnecessary risk out of the markets and investing in the U.S. dollar, which continues to gain upside momentum. The combination of the strengthening greenback, lower crude oil prices now trading near US$62.50 a barrel and further losses in the Dow Jones industrial average are pressuring nearly all commodities.
Speculative funds maintain their net-short position at the CBOT. They trimmed longs by 1,195 contracts in the week to Oct. 21, leaving them net short 40,699 contracts, the Commodity Futures Trading Commission said in its supplemental Commitments of Traders report.
On Friday, December CBOT wheat fell to a 17-month low, again largely on pressure from the outside markets, though prices did make an appearance in positive territory for a time. But the lower trade in equities and sell-off in crude oil held ultimate sway over prices.
While the lower prices are eventually expected to attract a fair amount of export business, there is still plenty of competition for U.S. wheat around the world, and as long as large traders continue to aggressively sell commodities, a major recovery isn't likely around the corner, a trader said. But there are signs interest is developing.
"Lower prices are stimulating some export interest despite fears in the broader economy," said Bryce Knorr, senior editor at Farm Futures.
"Syria, which was hit by drought this year, issued a tender for November over the weekend, with Iraq also announcing plans," he said.
Iraq seeks more than 50,000 metric tonnes of wheat, traders said. The state-run Grain Board of Iraq usually buys more than the amount for which it tenders.
Iraq needs to import around 4 million tonnes of wheat a year, according to trade ministry statistics, but it isn't clear how much the country has bought so far for 2008.
While fairly cold conditions Monday and early Tuesday will be seen in the central and southern Plains, readings will rise by Wednesday and turn favorable for germination and early wheat growth, DTN Meteorlogix said. Farmers should be able to get back in their fields and finish planting the remainder of the hard red winter wheat crop.