November 26, 2003
Wheat Futures Suffer Decline On Concern of US-China Trade
Wheat futures fell in Chicago due to concerns that a trade dispute with China will interfere with grain purchases from the world's most populous nation.
Wheat futures had their biggest decline in eight years on November 19 after Chinese officials canceled a visit to the U.S. during which they were to discuss wheat and soybean sales. China acted after the U.S. said it would restrict imports of Chinese textiles. Traders say they were expecting new grain sales to be announced today, indicating the trade dispute may be over.
"The trade was looking for Asian business this week and didn't see it,'' said Tim Hannagan, a grain trader with Alaron Trading Co. in Chicago. "When traders didn't see the Chinese business today, they used it to take profit.''
Wheat for March delivery fell 6 cents, or 1.5%, to $3.9025 a bushel on the Chicago Board of Trade. Wheat has gained 20% this year, reaching a 12-month high of $4.185 on November 13, after drought reduced production in Europe and Ukraine, allowing the U.S. to boost exports.
Orders for U.S. wheat in the marketing year that began June 1 are up 19% from a year ago, the U.S. Department of Agriculture said in a report last week.
The U.S. said it would restrict imports of knit fabric, robes and other textiles from China in response to complaints from U.S. manufacturers and lawmakers that unfair competition is costing textile mill jobs in North Carolina and other states.
J.B. Penn, the USDA's undersecretary for farm and foreign services, today said he believes the dispute between China and the U.S. will be resolved.
"We think these are short-term difficulties,'' Penn told reporters in a telephone news conference. "China will continue to be a big customer.''
U.S. wheat production this year is expected to rise 44%, to 2.34 billion bushels, or 63.6 million tons, from last year's drought-damaged crop, the USDA said in a November 12 report.
The world wheat surplus is expected to shrink to 126.3 million tons by June 30, 2004, 23% less than a year earlier, the department said in the same report.