US Wheat Review on Monday: Ends mostly lower on big world supplies
U.S. wheat futures closed mostly lower Monday after the government raised its forecast for world supplies, although spillover buying from neighboring markets helped pull prices off their lows.
Chicago Board of Trade December wheat slipped 1 cent to US$5.20 a bushel, well above its session low of US$5.06. Kansas City Board of Trade December wheat shed 5 cents to US$5.63, and Minneapolis Grain Exchange December wheat rose 6 cents to US$6.40.
Pressure from projections for record global production weighed on the markets, analysts said. The U.S. Department of Agriculture Monday pegged output for the 2008-09 marketing year at 682.4 million metric tonnes, up 2.2 million from last month.
The markets trimmed losses ahead of the close on borrowed strength from gains in CBOT corn and soybeans, said Tim Hannagan, analyst for Alaron. Wheat does not have bullish fundamentals to stand on, but it won't be far behind if the row crops rally, he said.
"The wheat is just the tail of the dog," Hannagan said. "There's really nothing bullish in the wheat, unless the corn and the beans go up."
Demand recently has been lackluster, as there is steady competition for export business from other countries, he said. Prior to trimming losses, CBOT December fell to a two-week low when it touched US$5.06.
Going forward, wheat will "just drag its feet" with corn and beans, unless holders of short positions decide to get out of the market, Hannagan said. Non-commercial speculative funds were net short CBOT wheat futures and options by 28,979 contracts as of Nov. 4, the Commodity Futures Trading Commission said in a supplemental Commitments of Traders report.
Kansas City Board of Trade
KCBT December wheat closed well off its session low of US$5.50. Late gains in CBOT corn and soybeans helped provide underlying support, although fundamentals for wheat remain bearish, a trader said.
The USDA increased its estimate for world 2008-09 carryout to 145.3 million tonnes from its October estimate of 144.4 million. The agency lowered crop estimates for Australia and Argentina due to poor weather, which was expected.
The increases in world ending stocks were "not a surprise to the market," an analyst said. "These UDSA reports didn't give us much."
Minneapolis Grain Exchange
Nearby MGE December wheat continued to increase its premium over CBOT and KCBT wheat. Since the beginning of the month, MGE December wheat is down 7 1/2 cents, while CBOT December wheat is down 16 1/4 and KCBT December wheat is down 10 cents.
Producers are not selling the wheat from their bins but are waiting for prices to rise, traders have said. MGE December wheat closed off its session low of US$6.33. MGE March wheat closed unchanged at US$6.27 1/4, above its session low of US$6.17.