December 4, 2008


US Wheat Review on Wednesday: Ends lower amid pressure from firm dollar



U.S. wheat futures closed lower Wednesday on outside pressure, including strength in the U.S. dollar, analysts and traders said.


Chicago Board of Trade March wheat lost 8 3/4 cents to US$5.19 3/4 per bushel. Kansas City Board of Trade March wheat sank 9 cents to US$5.46, and Minneapolis Grain Exchange March wheat slipped 3/4 cent to US$5.90 3/4.


A firm dollar is considered bearish for the markets because it makes U.S. commodities less attractive to foreign buyers. It seemed that the strong dollar overshadowed reports about China buying U.S. wheat, said Mike Zuzolo, analyst for Risk Management Commodities.


Sales to China would be supportive because the Chinese don't often buy U.S. wheat, Zuzolo said. Also, "usually when they start [buying] they keep doing it," he said.


China bought 30,000 tonnes of U.S. soft red winter wheat in the week ended Nov. 20, according to the U.S. Department of Agriculture's most recent export sales report.


Sales to China indicate U.S. prices are low enough to compete with domestic supplies, Zuzolo said. Still, wheat has to deal with a "weak demand psychology" after being snubbed in recent tenders, he said.


The markets could find some direction Thursday from a fresh USDA export sales report, due out at 8:30 a.m. EST, a trader said. Analysts expect U.S. wheat sales for the week ended Nov. 27 to total 350,000 to 550,000 tonnes.


Wheat's weakness Wednesday didn't do any technical damage, Zuzolo said. The losses brought prices "right there on the bottom of the range" the markets have been trading in, he said.


Grains will continue to watch outside markets, including energies and equities, for direction, traders said. The dollar will remain a factor, as well, they said.



Kansas City Board of Trade


Overall, there was "just a light, choppy trade" at the KCBT, a floor trader said. Traders continued to watch the stock market, he said.


"It's just going to take a lot to get it to go up," the trader said. "It's just going to take some really good news. We get bad financial news here or overseas, almost daily something happens."


KCBT March wheat closed at its session low of US$5.46. Export business is being done in the world, but the U.S. is missing out on sales, the trader said.


"I think the general feeling is that if we make a move, it's going to be to the downside," he said.



Minneapolis Grain Exchange


MGE wheat slipped amid a "lack of external inputs in the market," a floor trader said. There is not a lot of grain moving in the country and there was "no major interest" in trading, he said.


One notable event was that a mill decided to price wheat out to 2010, a MGE trader said. Still, "overall volume was light," he said.


Statistics Canada on Thursday will issue an update to its 2008-09 all-wheat production forecast. Trade estimates range from 25.5 million tonnes to 28.4 million, compared with Statistics Canada's October estimate of 27.266 million.


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