December 5, 2008


US Wheat Review on Thursday: Nearby CBOT December sinks to 20-month low



U.S. wheat futures tumbled to new lows Thursday on technical selling and a batch of fresh news that reinforced bearish concerns about large global supplies.


Chicago Board of Trade March wheat dropped 33 3/4 cents to US$4.86 per bushel. Kansas City Board of Trade March fell 33 cents to US$5.13, and Minneapolis Grain Exchange March wheat sank 26 1/2 cents to US$5.64 1/4.


CBOT March wheat hit sell stops as the contract slid to a new low below US$5 per bushel, a trader said. The contract ended 1 cent above its session low.


CBOT December wheat hit a session low of US$4.67, the lowest price for a nearby contract on a monthly continuation chart since April 2007. It closed down 33 cents at US$4.67 3/4.


It was bearish that Statistics Canada hiked its estimate for 2008-09 all-wheat production to 28.611 million tonnes from its previous forecast of 27.266 million, analysts said. The increase was above the highest pre-report estimate of 28.4 million.


The world was already projected to produce a record crop in 2008-09 due to expanded plantings and favorable weather. Big crops in the Northern Hemisphere are making up for production losses in Australia and Argentina, an analyst said.


Weekly U.S. wheat export sales of 207,600 tonnes were a marketing year-low, according to the U.S. Department of Agriculture. Some traders dismissed the weak sales a bit because they included the Thanksgiving holiday, although they were still "a negative surprise," Kleist said. The export sales were down 53% from the previous week and 47% from the prior four-week average, the USDA said. Analysts had been expecting sales of 350,000 to 550,000 tonnes.


"You can say that it will dip because it's a holiday week but on the same token you didn't want to see it fall apart," Kleist said of the sales.



Kansas City Board of Trade


Sell stops were triggered as KCBT wheat sank, a floor trader said. Bearish fundamental news and pressure from losses in other markets weighed on wheat, he said.


CBOT corn and soybeans ended lower with wheat. Crude oil, which has been giving the grains direction, sank for a fifth straight session as the market feared supplies piling up in the face of weak demand.


In other news, Argentina lowered its export tax on wheat by 5 percentage points, encouraging bearish ideas that there will be more competition for export business, an analyst said. The decrease "added to the bearish scenario," he said.



Minneapolis Grain Exchange


MGE wheat futures slid with the other markets. The bigger-than-expected increase in Canada's production weighed on prices, a trader said.


"The world wheat crop just keeps getting bigger and bigger," an analyst said.


The slide in crude oil set a bearish tonnee for all the grains, he said. Crude oil is linked to the grains because funds often trade in a basket of commodities. There is a connection because ethanol is made from corn.


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