MarketsFarm — There’s more to the sharp decline in U.S. wheat and corn futures than the possibility of Ukrainian exports returning to the global market along with the massive liquidation of longs, according to analyst Errol Anderson of ProMarket Communications in Calgary.
“My theory with what is going on is that we’re seeing a fairly significant meltdown in wheat and corn right now. We may have seen the top of the wheat market. It’s possible, although nobody wants to say that,” he said.
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On Wednesday alone, the July contract for Minneapolis wheat tumbled 50 1/2 cents, closing at $11.97 per bushel (all figures US$). Chicago wheat fell 46.25 cents, ending the day at $10.4125/bu. and Kansas City wheat lost 37.25 cents to finish at $11.2825/bu.
Those declines were on top of steep losses incurred the day before, when trading resumed after the U.S. Memorial Day holiday.
Over the same two days, July corn on the Chicago Board of Trade (CBOT) shed 46 cents, sinking to $7.3125/bu.
Anderson pointed to recent news stories from China about mid-sized banks being short on cash and prohibiting customers from withdrawing their money.
“I think there is a credit issue here that’s underneath and hasn’t jumped out at us yet,” he theorized, suggesting “it’s a factor that can become a fire.
“I’m sensing China is having economic difficulties. That’s bearish on commodities because they’re half the world in commodities,” Anderson said, noting the vast quantities of grains the country imports.
“Everybody is bullish on crude oil, but I can see the oil prices starting to break down because of credit issues that are surfacing.”
— Glen Hallick reports for MarketsFarm from Winnipeg.
