US Wheat Review on Friday: Falls on technical selling, spillover
Technical selling and spillover pressure drove U.S. wheat futures lower Friday, although wheat's losses were not as steep as in the corn and soy markets.
Chicago Board of Trade March wheat fell 10 1/2 cents to US$4.75 1/2, down 85 3/4 cents on the week. Kansas City Board of Trade March wheat dropped 9 3/4 cents to US$5.03 1/4, down 78 1/4 cents on the week. Minneapolis Grain Exchange March wheat sank 13 1/4 cents to US$5.51, down 59 3/4 cents on the week.
There was follow-through selling after wheat on Thursday broke through technical support levels, including US$5 in nearby CBOT December wheat, said Tim Hannagan, analyst for Alaron. The contract approached technical support at US$4.50, hitting a session low of US$4.55, he said.
CBOT December wheat closed down 10 cents at US$4.57 3/4. That is the lowest close for a nearby contract since April 2007.
"Technically speaking, you came down to support levels that were expected," Hannagan said. "It was largely technical today."
Heavy losses in CBOT corn and soybeans weighed on wheat, traders said. A slide in crude oil was a bearish influence, they said.
There was some buying of wheat and selling of corn, Hannagan said, on ideas that there will be increased use of wheat for animal feed. CBOT March corn fell 24 3/4 cents to US$3.09 1/4.
Crude oil will continue to provide direction to the grains, and the low in the grains will occur when crude oil has bottomed, Hannagan said. Crude oil is linked to the grains because funds often trade in a basket of commodities and because ethanol is made from corn.
The U.S. Department of Agriculture on Thursday will issue its monthly supply and demand report. There could be some short-covering next week ahead of the report, Hannagan said.
Kansas City Board of Trade
At the KCBT, "trade was sporadic at best," a floor trader said. There was outright selling of KCBT March and some buying of March/selling July in spread trades, he said.
The December/March spread narrowed to close at 13 1/2 cents, compared to 16 cents Thursday. Traders are getting out of the December contract ahead of expiration, a trader said. KCBT December wheat fell 7 1/4 cents to US$4.89 3/4.
The next downside target for KCBT March wheat is taking out US$5 and then US$4.75, said Larry Glenn, broker and analyst for Frontier Ag. Worries about the economy continued to keep traders on the sidelines after the Bureau of Labor Statistics said U.S. nonfarm payrolls fell 533,000, the largest decline since December 1974, and the unemployment rate came in at 6.7%, the highest since October 1993, analysts said.
Minneapolis Grain Exchange
MGE wheat closed lower with the other markets. The December/March spread widened to close at 10 cents, premium December, compared to 8 cents Thursday. December wheat on Friday dropped 11 1/4 cents to US$5.61.
There was some talk about Pakistan tendering for wheat, although it was not a major factor in the markets, a trader said. Pakistan has floated a tender to import 500,000 metric tonnes of wheat to stabilize local prices and meet a domestic shortfall.
Producers continue to hold on to their hard red spring wheat, rather than selling it, while hoping for prices to go up, an analyst said. HRS wheat, traded at the MGE, is used to make bread.