December 20, 2008


US Wheat Review on Friday: Wheat drops on dollar, keeps weekly gain



Profit-taking and currency pressure in Friday's trade nibbled but didn't devour the rally posted in U.S. wheat this week.


Overall, wheat managed to post gains for the week, with the benchmark Chicago Board of Trade contract up 30 1/4 cents.


The CBOT March wheat fell 8 1/4 cents to close at US$5.63 1/4 per bushel. The contract traded at a nine-cent range, topping at US$5.68. Kansas City Board of Trade March wheat dropped 7 1/2 cents to US$5.83, and Minneapolis Grain Exchange March wheat lost 5 3/4 cents to close at US$6.25 1/4.


Speculative funds sold about 2,000 lots, according to a pre-close estimate.


The strong rally in the U.S. dollar weighed on the commodities in "quiet, low-volume" trade, brokers at the Chicago Board of Trade said.


The wheat sell-off, which can also be seen in the corn and soybean pits, "is a continuation of the short-covering rally in the dollar," said Greg Wagner, a senior commodity analyst at AgResource. Winter-kill talk "provided psychological underpinning for a market that seems to want to regain its footing," Wagner said. But, he added, currency issues remain the dominant theme Friday.


"After the week's rally, we were due for a setback," a CBOT floor trader said, pointing to the firmer dollar and weaker energies as pressuring factors.



Kansas City Board of Trade


Despite slipping Friday, the nearby hard red winter wheat contract posted a 29-cent gain for the week.


Talk of winter wheat kill continues, but meteorologists say any significant threat is limited to less than 10% of the hard red winter wheat production area. "There's no meaningful reason for us to expect any real problem," said agricultural meteorologist Drew Lerner of World Weather.


Buying on winter-kill concerns has burnt many colleagues in the past, a CBOT floor trader said. But the forecasts "may have kept some aggressive sellers at bay," he added.



Minneapolis Grain Exchange


Nearby hard red spring also posted gains for the week, despite the dollar's pressure on Friday. The March contract posted a 21-cent gain for the week.


"The market should continue to see volatile swings as we move forward. Short-term, look for the "holiday mode" to continue into the New Year," said Ryan Kelbrants, a hard red spring wheat analyst for Benson Quinn Commodities. "The U.S. dollar and outside markets will continue to be the catalyst for price action in Minneapolis," he added.


"The closing of the trading floor is going to create new opportunities and challenges for traders as we look into the future," Kelbrants said, predicting greater use of electronic trading across the agricultural commodities space.


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