Post by Paddy by Grace on Feb 20, 2010 0:49:52 GMT -7
www.agrimoney.com/marketreport/wheat-price-crumples-in-both-europe-and-us--464.html
Wheat led crops lower on Thursday as a stronger dollar gave bears new resolve to hold on to their short positions, and open a few more.
The nerves over short positions, especially in wheat, where they reached a record last week, disappeared as the US Department of Agriculture, at its outlook conference, came up with some non-startling planting estimates.
It forecast corn acreages next year at 89m acres, 1m acres more than a "baseline" guess formulated last year. Soybean plantings were pegged at 77m acres, 500,000 acres more than the baseline guess with wheat plantings pegged at 53.8m acres, down 1.2m acres.
The data were in line with the forecasts of many investors, who appear anyway more concerned with supply and demand data due out on Friday.
Best of a bad bunch
That left traders to focus on the dollar, which won something of an ugly contest, least ugly that is, between major currencies.
Sure, an unexpected rise in weekly US jobless claims initially sent the greenback lower. But with eurozone worries resurfacing, Europe's single currency soon won back its detractors.
And sterling showed an even grizzlier face with data showing a marked deterioration in public sector finances. Oh, and commodity currencies had already been hit by news that the International Monetary Fund was to sell more gold.
So the dollar gained on the day despite itself, making exports such as crops less competitive.
'Prices will have to fall considerably'
Indeed, if anyone had any doubts that US wheat was still too expensive, Egypt issued a reminder by again opting for French and Russian wheat in a tender, this time for 300,000 tonnes. The US has not made a showing in an Egyptian tender since September.
"This underscores the fact US wheat prices remain way too high versus the rest of the world, roughly $25-35 a tonne," Victor Lespinasse, GrainAnalyst.com's Chicago markethingycher said.
"To increase US wheat exports, prices will have to fall considerably relative to the rest of the world. This is why wheat is the weakest pit on the floor."
So it was, ending down 2.0% at $4.85 a bushel for March delivery. With delivery quite the theme, given the imminent expiry of March lots.
"We may be setting up for some significant deliveries against the March contracts late next week, especially corn and wheat," Darrell Holaday at Country Futures said, flagging what is typically seen as a bearish signal, by showing that it is not just speculators who are piling on selling pressure.
Ethanol vs crude
But at least corn would be helped by the oil price, right?
Wrong. Sure crude jumped 2% to top $79 a barrel. But the market for ethanol, which nearly a third if US corn ends up being turned into, is not currently responding.
"It is also very important to point out that ethanol is another $0.01 weaker today with unleaded gasoline up $0.02 per gallon," Mr Holaday said half way through the trading day.
"They have been going in opposite direction over the last week. Obviously, there seems to be at least a near-term oversupply of ethanol."
What's more, Argentina's farm ministry raised the bar for the country's corn crop even further, flagging a harvest of up to 21m tonnes, compared with the US Department of Agriculture;s forecast of 17.2m tonnes.
March corn closed down 2.75 cents at $3.57 ¼ a bushel.
Soy ploys
Soybeans were actually the best of the bunch, in percentage terms, amid some lingering doubts that the huge South American harvests will actually be as huge as some observers have predicted.
Crops after all face challenges of localised heavy rainfall, which has encouraged disease in some areas and slowed harvesting in others, as well as more widespread logistical difficulties of getting crops to railhead, silo and/or port.
Soybeans for March closed down 3.5 cents at $9.48 a bushel.
Cheap, but not cheap enough
Still, looking across the Atlantic, at least the weakness of sterling would protect wheat in London, right? Another wrong.
"Despite being the cheapest source of feed wheat in the European Union, we have still drifted lower as buyers still focus on the fundamentals of a large surplus of wheat worldwide and the potential for a third record crop in 2010-11," Hugh Schryver, at Glencore's UK grain arm, said.
Rival UK grain trader Gleadell said: "The bearish scenario of the wheat market still remains intact. Plentiful supplies and limited demand has traders talking values lower."
London wheat for March lost a whopper £1.40 to end at £92.75 a tonne, a five-month low for the near-term contract.
And Paris wheat gained little from its victory in the Egyptian tender, shedding E1.50 for March delivery to close at E123.50 a tonne, a four-month low.
Hurrah for rapeseed which, for now at least, is being supported by healthy crush margins, and closed up E1.25 at E295.50 a tonne, a seven-month top for a spot lot.
Wheat led crops lower on Thursday as a stronger dollar gave bears new resolve to hold on to their short positions, and open a few more.
The nerves over short positions, especially in wheat, where they reached a record last week, disappeared as the US Department of Agriculture, at its outlook conference, came up with some non-startling planting estimates.
It forecast corn acreages next year at 89m acres, 1m acres more than a "baseline" guess formulated last year. Soybean plantings were pegged at 77m acres, 500,000 acres more than the baseline guess with wheat plantings pegged at 53.8m acres, down 1.2m acres.
The data were in line with the forecasts of many investors, who appear anyway more concerned with supply and demand data due out on Friday.
Best of a bad bunch
That left traders to focus on the dollar, which won something of an ugly contest, least ugly that is, between major currencies.
Sure, an unexpected rise in weekly US jobless claims initially sent the greenback lower. But with eurozone worries resurfacing, Europe's single currency soon won back its detractors.
And sterling showed an even grizzlier face with data showing a marked deterioration in public sector finances. Oh, and commodity currencies had already been hit by news that the International Monetary Fund was to sell more gold.
So the dollar gained on the day despite itself, making exports such as crops less competitive.
'Prices will have to fall considerably'
Indeed, if anyone had any doubts that US wheat was still too expensive, Egypt issued a reminder by again opting for French and Russian wheat in a tender, this time for 300,000 tonnes. The US has not made a showing in an Egyptian tender since September.
"This underscores the fact US wheat prices remain way too high versus the rest of the world, roughly $25-35 a tonne," Victor Lespinasse, GrainAnalyst.com's Chicago markethingycher said.
"To increase US wheat exports, prices will have to fall considerably relative to the rest of the world. This is why wheat is the weakest pit on the floor."
So it was, ending down 2.0% at $4.85 a bushel for March delivery. With delivery quite the theme, given the imminent expiry of March lots.
"We may be setting up for some significant deliveries against the March contracts late next week, especially corn and wheat," Darrell Holaday at Country Futures said, flagging what is typically seen as a bearish signal, by showing that it is not just speculators who are piling on selling pressure.
Ethanol vs crude
But at least corn would be helped by the oil price, right?
Wrong. Sure crude jumped 2% to top $79 a barrel. But the market for ethanol, which nearly a third if US corn ends up being turned into, is not currently responding.
"It is also very important to point out that ethanol is another $0.01 weaker today with unleaded gasoline up $0.02 per gallon," Mr Holaday said half way through the trading day.
"They have been going in opposite direction over the last week. Obviously, there seems to be at least a near-term oversupply of ethanol."
What's more, Argentina's farm ministry raised the bar for the country's corn crop even further, flagging a harvest of up to 21m tonnes, compared with the US Department of Agriculture;s forecast of 17.2m tonnes.
March corn closed down 2.75 cents at $3.57 ¼ a bushel.
Soy ploys
Soybeans were actually the best of the bunch, in percentage terms, amid some lingering doubts that the huge South American harvests will actually be as huge as some observers have predicted.
Crops after all face challenges of localised heavy rainfall, which has encouraged disease in some areas and slowed harvesting in others, as well as more widespread logistical difficulties of getting crops to railhead, silo and/or port.
Soybeans for March closed down 3.5 cents at $9.48 a bushel.
Cheap, but not cheap enough
Still, looking across the Atlantic, at least the weakness of sterling would protect wheat in London, right? Another wrong.
"Despite being the cheapest source of feed wheat in the European Union, we have still drifted lower as buyers still focus on the fundamentals of a large surplus of wheat worldwide and the potential for a third record crop in 2010-11," Hugh Schryver, at Glencore's UK grain arm, said.
Rival UK grain trader Gleadell said: "The bearish scenario of the wheat market still remains intact. Plentiful supplies and limited demand has traders talking values lower."
London wheat for March lost a whopper £1.40 to end at £92.75 a tonne, a five-month low for the near-term contract.
And Paris wheat gained little from its victory in the Egyptian tender, shedding E1.50 for March delivery to close at E123.50 a tonne, a four-month low.
Hurrah for rapeseed which, for now at least, is being supported by healthy crush margins, and closed up E1.25 at E295.50 a tonne, a seven-month top for a spot lot.