November 20, 2008


US Wheat Review on Wednesday: Slips on strong dollar, weak outside markets



U.S. wheat futures slipped Wednesday on pressure from a stronger dollar and weakness in other markets.


Chicago Board of Trade December wheat slipped 2 3/4 cents to US$5.27 per bushel. Kansas City Board of Trade December wheat dropped 1 1/2 cents at US$5.59 1/2, and Minneapolis Grain Exchange December wheat tumbled 11 1/4 cents to US$6.04 1/2.


Strength in the U.S. dollar weighed on wheat, as it gives foreign countries less buying power, a trader said. The markets were hoping a weaker dollar would attract more export business to the U.S., an analyst said.


Market chatter indicates that Pakistan may be tendering for 500,000 tonnes of wheat, analysts said. Other countries, such as Bangladesh, also are in the market to buy wheat, they said.


Traders had been "anticipating that if the dollar would weaken, we could see some of the world tenders for wheat come to the United States," said Brian Hoops, president of Midwest Market Solutions.


Weakness in crude oil added pressure to the grains, a trader said. Crude oil is linked to the grains because ethanol is made from corn and because funds often trade in a basket of commodities.


There was a lack of fresh fundamental news for the markets. AgResource Company predicted global wheat production in 2009-10 will drop about 5%, including reductions in Europe, Russia and the U.S., following a slide in prices.


However, the markets aren't concerned about a decline in production because the world is expected to grow a record crop in 2008-09, Hoops said. The U.S. Department of Agriculture last week pegged 2008-09 global production at 682.37 million tonnes.


"We're still trying to get rid of this year's crop," Hoops said.


The USDA on Thursday is slated to issue its weekly export sales data. Weekly U.S. wheat export sales are expected to be 350,000 tonnes to 550,000 tonnes, analysts said.



Kansas City Board of Trade


KCBT wheat drifted lower on weakness in outside markets and strength in the dollar, a floor trader said. Wheat will continue to take its cue from outside markets, and the downside seems to offer the path of least resistance, he said.


"If we don't get some help from the outside markets, if we don't get a reason [to rise], like the dollar breaks, you've got to respect that's the way the market seems to want to go," he said.


Market participants continued to roll positions to March from December, with the spread closing at 13 1/2 cents. Wheat is stuck in a sideways trading range amid a lack of fresh news, traders said.



Minneapolis Grain Exchange


Profit-taking helped drive MGE wheat lower, a floor trader said. Some traders sold MGE wheat while buying CBOT wheat or KCBT wheat, he said.


Trading was slow at the MGE, and "flat price action was almost nothing," a floor trader said.


Japan is tendering for wheat in its weekly tender, although other fresh news was scarce, he said.


The December/March spread traded between 4-6 cents and closed at 5 cents. It seems as though market participants are rolling positions to March amid ideas demand needs are covered for now, he said.


There is a "fair amount of interest" in trading December/March spread at even money and at around 10 cents, the floor trader said.


However, the market seems to be stuck in between those areas, he said.


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