Chicago | Reuters — U.S. wheat futures fell 1.5 per cent on Thursday, their biggest decline in two weeks, on a profit-taking setback following a rally to their highest level since late October, traders said.
Corn futures also sagged, with weakness in wheat prices weighing, but soybeans edged higher due to bargain buyers entering the market following three straight days of declines.
A wave of profit-taking hit the wheat market after prices for the front-month Chicago Board of Trade contract hit $7.00-3/4 a bushel, its first time above the psychologically important $7 level since Oct. 25 (all figures US$).
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“A lot of it has to do with the fund positioning,” said Brian Hoops, president and senior market analyst with Midwest Market Solutions. “Most of this rally has been based off of technicals and fund short-covering, and after the funds cover all their shorts there is very little reason from a fundamental standpoint for them to continue to push higher.”
CBOT May soft red winter wheat futures ended down 10 cents at $6.73-3/4 a bushel. CBOT May corn was 3-1/2 cents lower at $4.85 a bushel.
CBOT wheat had surged 6.7 per cent during the previous two days, rallying through key technical resistance points as investors scrambled to unwind bearish positions built up due to slack export demand and plentiful global supplies.
Concerns about political upheaval in Ukraine, a key exporter of the grain, as well as uncertainty about the U.S. winter wheat crop, kept the declines in check on Thursday. Traders said the market will assess how much damage was done to the U.S. crop by winter weather when the crop emerges from dormancy in the next few weeks.
“You have the Black Sea situation and you have concerns in the U.S. about winter wheat production with ongoing dryness that we are seeing in the Plains,” said Luke Mathews, a commodities strategist at Commonwealth Bank of Australia.
CBOT May soybeans were up 9-1/4 cents at $13.96 a bushel, closing well off their session highs.
The market shrugged off expected news that China had cancelled up to 600,000 tonnes of South American soybean cargoes for shipment between March and May.
“It’s ‘sell the rumour, buy the fact’ on the Chinese news being confirmed, and the fact that we only saw Brazil lose 10 cargoes, as opposed to 20, which was rumoured,” said Mike Zuzolo of Global Commodity Analytics.
Thursday’s gains were kept in check as traders were waiting for announcements of the cancellation of U.S. deals due to a softer Chinese economy that showed up in weak export data from the country earlier this week.
“The trade seeing China’s South American cancellations only ups the ante for them to cancel U.S. supplies at some point,” Matt Zeller, direct of market information at INTL FCStone, said in a note to clients. “Some hard evidence of that will be needed one of these weeks.”
— Mark Weinraub is a Reuters correspondent covering grain markets from Chicago. Additional reporting for Reuters by Julie Ingwersen in Chicago and Naveen Thukral in Singapore.
