U.S. wheat extends losses on forecasts for hefty stockpiles

U.S. wheat futures declined for a fourth straight session on Wednesday, setting a five-month low and adding to Tuesday’s loss of more than three per cent after the U.S. government forecast hefty stockpiles.

Corn fell to a 3-1/2 week low, while soybeans closed mixed as firm cash markets supported the nearby contract.

At the Chicago Board of Trade, most-active March wheat fell 9-1/2 cents to settle at $8.12 per bushel after dipping to $8.09, just above chart support at its 200-day moving average near $8.07 (all figures US$).

Front-month December wheat ended at $7.94-3/4, the lowest spot price since July 11.

CBOT March corn settled down 2-1/2 cents at $7.25-1/2 a bushel while January soybeans closed up 1-1/2 cents at $14.73-1/2 a bushel.

Grains continued to sag one day after the U.S. Department of Agriculture raised its estimate of U.S. 2012/2013 wheat ending stocks to 754 million bushels, 50 million bushels more than its November estimate, due to the slow pace of exports.

USDA also raised its forecast for global wheat inventories to almost 177 million tonnes from 174 million in November and above market projections following estimates of larger crops from Australia, Canada and China.

The bearish data on Tuesday knocked CBOT March wheat out of a trading range it had been in since July, triggering technical selling that continued on Wednesday.

"Wheat is just trying to price itself as a feed grain. If you can’t export it, it’s going to price itself into feed," said Dan Cekander, analyst with Newedge USA in Chicago.

Wheat competes in the feed market with corn. The premium for spot CBOT wheat over corn fell to 73-3/4 cents per bushel at midday Wednesday, from $1.06 ahead of USDA’s report.

Grain markets had little reaction after the U.S. Federal Reserve announced plans to ramp up its stimulus to the economy, although U.S. stocks rose and the euro rallied against the dollar following the news.

The central bank committed to monthly purchases of $45 billion in Treasuries on top of the $40 billion per month in mortgage-backed bonds it started buying in September. In a surprise move, the Fed also adopted numerical thresholds for policy, a step that had not been expected until early next year.

Corn falls for fifth straight session

CBOT corn sagged in sympathy with the declines in wheat, as well as slow export demand, posting its fifth loss in as many sessions.

South Korea’s largest feed maker, NOFI, previously a loyal U.S. corn buyer, bought South American and South African corn in a major tender in a new strategy to diversify supply sources.

Also, data from the U.S. Energy Information Administration showed U.S. production of corn-based ethanol in the latest week fell to 824,000 barrels per day, down 1.3 per cent from a week earlier, while stockpiles rose to 20 million barrels, up 3.6 per cent.

"I don’t think the corn bulls like the build in weekly ethanol stocks," Cekander said.

Underpinning the market, USDA on Tuesday kept its U.S. corn stocks forecast at 647 million bushels, the smallest in 17 years, reflecting the impact of the worst drought in half a century this year.

Soybean futures ended mixed. Firm cash values for soybeans in the U.S. Gulf export market as well as the interior Midwest helped lift nearby contracts.

But deferred contracts were pressured by forecasts for favourable crop weather in Brazil, which is projected as the world’s biggest soy producer. The USDA on Tuesday left its forecast for Brazil’s soybean harvest unchanged at a record-large 81 million tonnes, and the Brazilian government has estimated the crop at 82.6 million tonnes.

Weather forecasts called for beneficial rains in southern crop areas of Brazil over the next two weeks.

"Brazil looks good, favorable as a whole, and there is an improving trend in Argentina, but not perfect. Occasional showers will set back planting, but we won’t see the big soaking rains that they’ve been having," said Andy Karst, meteorologist for World Weather Inc.

— Julie Ingwersen covers agricultural commodity markets for Reuters in Chicago. Additional reporting for Reuters by Michael Hogan in Hamburg and Manolo Serapio Jr. in Singapore.

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