US Wheat Review on Thursday: Ends mixed after USDA lssues bearish data
U.S. wheat futures closed mixed Thursday as a bearish government crop report competed with the bullish influence of a weaker U.S. dollar.
Chicago Board of Trade March wheat slipped 2 cents to US$5.07 1/2 per bushel. Kansas City Board of Trade March wheat rose 2 3/4 cents at US$5.34, and Minneapolis Grain Exchange March wheat shed 2 1/2 cents to US$5.88 3/4.
The U.S. Department of Agriculture, in its December supply and demand report, raised its estimate for 2008-09 U.S. wheat carryout to 623 million bushels from its November estimate of 603 million. The increase was bearish as it exceeded the highest pre-report analyst estimate of 606 million, traders said.
"That carryout number, 623, is bearish, no doubt about it," said Jason Britt, president of Central State Commodities.
The USDA increased its forecast for world wheat carryout to 147.4 million from the November estimate of 145.3 million. The world is expected to produce more wheat in 2008-09 than ever before due to expanded plantings and favorable weather.
Despite the bearish report, wheat traded both sides during the day session amid strength in other markets and weakness in the dollar. A falling dollar is seen as supportive for grains because it gives foreign countries more buying power.
Britt said he was "a little disappointed" in wheat because it did not keep up with solid gains in the neighboring CBOT corn and soybean markets. Crude oil, which has been providing direction to the grains lately, also ended higher.
Still, CBOT March wheat was able to close above US$5, a sign the market may be able to build "more of a base," Britt said. The market should stabilize around that US$5 level, unless it comes under heavy spillover pressure from declines in the neighboring markets, he said.
Kansas City Board of Trade
KCBT wheat found support from the sharply lower U.S. dollar, a floor trader said. The market "kind of grudgingly went higher" after the USDA issued its bearish report, he said.
"There really wasn't much to hang your hat on, other than the weaker dollar," the trader said.
Thursday's choppy activity doesn't give much of an indication about where wheat is headed in terms of price, the trader said. KCBT March wheat hit a session high of US$5.42, near first resistance at US$5.50, he said.
"The report definitely wasn't anything to get too excited about wheat for," the trader said.
Minneapolis Grain Exchange
MGE wheat closed lower with CBOT wheat. March wheat remained at a premium to the May contract month. May wheat dropped 3 1/4 cents to US$5.86.
Weekly U.S. wheat export sales of 239,300 tonnes weren't impressive, a trader said. It was the second straight week that wheat saw a lackluster export report, he said.