December 2, 2008


US Wheat Review on Monday: Slides on weak outside markets, firm dollar



Strength in the U.S. dollar and losses in neighboring and outside markets dragged U.S. wheat futures sharply lower Monday.


Chicago Board of Trade March wheat closed down 33 1/4 cents at US$5.28 a bushel. Kansas City Board of Trade March wheat lost 27 1/2 cents to US$5.54, and Minneapolis Grain Exchange March wheat sank 22 3/4 cents to US$5.88.


Weakness in CBOT corn and soybeans and in outside markets, such as crude oil and equities, weighed on wheat amid a lack of fresh news, analysts said. The firm dollar was bearish because it makes U.S. wheat less attractive to foreign buyers, they said.


"A lot of it had to do with what was going on in the outside markets more than anything," an analyst said about wheat's losses.


There continued to be chatter about quality losses in Australia because of rains during harvest. Downgrades in Australia would imply more demand coming to the U.S., as importers search for good-quality wheat, an analyst said.


Conditions should improve for cutting Down Under, as forecasts for major wheat areas generally call for "very little rain" during the coming week, private weather firm DTN Meteorlogix said. Still, rain and thunderstorms late last week through New South Wales and Queensland have already slowed cutting and threatened quality, the firm said.


"There really wasn't a whole lot of negative news for wheat, yet we crashed," the analyst said. "You've got to figure it's got to do more with the outside economy."


Egypt's state-owned General Authority for Supply Commodities said after the close of trading that it will tender Tuesday to buy at least 55,000 to 60,000 metric tonnes of wheat for shipment Jan. 1-10 on a free-on-board basis. The deadline for bids is 1200 GMT Tuesday.


The results of Egypt's tender and activity in outside markets should give wheat direction Tuesday, a trader said. GASC often tenders for 55,000 to 60,000 tonnes and then buys more.


Egypt, a major buyer on the world wheat market, bought 55,000 tonnes of U.S. soft red winter wheat last week. SRW wheat, traded at the CBOT is used to make bread.


Nearby CBOT December wheat, which is in delivery, closed down 32 3/4 cents at US$5.09 3/4.



Kansas City Board of Trade


KCBT March wheat hit a session low of US$5.46 and trimmed losses before the close. Nearby KCBT December wheat dropped 27 1/4 cents to US$5.35 3/4.


The firm dollar and falling outside markets knocked down KCBT wheat, a trader said. Losses in corn and soy added pressure amid some talk about beneficial rains in Argentina, an analyst said.


Heading into winter, weather conditions in the Southern Plains for hard red winter wheat, traded at the KCBT, are about "as favorable as can be expected," Meteorlogix said. Some periodic cold weather in the region does not look to be cold enough to harm wheat, although episodes of strong winds may need to be watched, the weather firm said.



Minneapolis Grain Exchange


MGE March wheat hit a session low of US$5.80. MGE December wheat finished down 21 cents at its session low of US$5.78 1/2.


The activity in outside markets was the focus for wheat, a trader said. Weekly U.S. wheat export inspections of 19.808 million bushels exceeded trade estimates, which ranged from 14-19 million bushels.


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