Power Hour: Wheat Drops Below $8, First Time in Five Months

December 20, 2012 08:30 AM
Power Hour: Wheat Drops Below $8, First Time in Five Months

Copyright 2012 Bloomberg.

By Rudy Ruitenberg and Luzi Ann Javier

Wheat fell below $8 a bushel for the first time since July 3 in Chicago amid concerns of a lack of export demand and as snow in the central U.S. and a jump in German plantings boosted the outlook for production next year.

Egypt’s state grain buyer bought 120,000 metric tons of U.S. soft red winter wheat yesterday, less than half the 280,000 tons of U.S. wheat purchased in a Dec. 1 tender.

"People expected more" from Egypt, said Cedric Weber, an analyst at farm adviser Offre & Demande Agricole, by phone from Bourges, France. "The U.S. wheat exports have been bearish. You need three to four weeks of a good export pace from the U.S. before the market can really improve."

Wheat for March delivery fell as much as 1.7 percent to $7.9175 a bushel on the Chicago Board of Trade, the lowest since July 3 and paring this year’s advance to 21 percent. The contract traded at $7.9275 at 1:27 p.m. Paris time.

Milling wheat for delivery in March fell as much as 2.3 percent to 247.50 euros ($328) a ton, the lowest since July 12, and traded at 247.75 euros on NYSE Liffe in the French capital recently. The grain has climbed 27 percent this year.

U.S. wheat export sales from June 1 through to Dec. 13 totaled 492.1 million bushels, down 13 percent from 567.2 million tons in the year-earlier period, the U.S. Department of Agriculture reported this week.

Plains Snow

Snow in the U.S. Plains and increased sowing of winter wheat in Germany, the European Union’s second-biggest grower, are improving production prospects for 2013, according to Weber.

Blizzard conditions were forecast to drop 2 inches to 5 inches (5 centimeters to 13 centimeters) of snow in the Central Plains last night and today, according to Commodity Weather Group. German winter wheat planting jumped 7.1 percent to an estimated 3.1 million hectares, the government reported.

Soybeans dropped for a fourth day to the lowest price in more than three weeks on concern demand for U.S. supplies may weaken after China canceled some orders, and as growing conditions improve in Brazil.

The oilseed for March delivery fell as much as 1 percent to $14.165 a bushel in Chicago, the cheapest for the most-active contract since Nov. 23. Soybeans were at $14.2375 recently, 18 percent higher this year.

U.S. Exports

Export sales from the U.S., the largest grower and shipper last year, probably fell to 400,000 to 1 million tons in the week to Dec. 13, from 1.3 million tons a week earlier, according to a Bloomberg survey of five analysts. China, the largest buyer, canceled 300,000 tons for shipment before Sept. 1, the USDA said on Dec. 18. The USDA will release the latest export sales data today in Washington.

"The trade continued to reel from the export cancellations," Ker Chung Yang, an analyst at Phillip Futures Pte, said in a report today. "Near-term conditions in Brazil look generally good," boosting crop prospects, he said.

Croplands from Brazil’s Parana to Sao Paolo and Mato Grosso do Sul will have showers and thunderstorms over the next few days, maintaining soil moisture, Accuweather.com said in a forecast yesterday.

Corn for delivery in March fell as much as 1.4 percent to $6.93 a bushel, the lowest price for the most-active contract since July 11, and was at $6.9325 in recent trading. Futures, which surged to a record $8.49 in August, are up 7.2 percent this year.


--With assistance from Mario Parker and Jeff Wilson in Chicago and Sungwoo Park in Seoul. Editors: Claudia Carpenter, John Deane


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