Thursday, 03 May 2012 00:28
CHICAGO: US wheat futures sank 2.5 percent Wednesday as good crop prospects, including record-yield potential in top wheat state Kansas, pointed to a huge harvest that would add to near-record-high global wheat supplies.
Corn futures also tumbled, pressured by strong crop prospects amid early seeding and rains across portions of the US Midwest. In addition, lower-cost wheat was poised to displace more corn in livestock feeding rations in coming months.
Spread liquidation, with investors selling nearby corn contracts and buying deferred months, accelerated the decline in old-crop futures.
Soybeans turned lower as early support from solid US exports and drought-reduced supplies in South America was eclipsed by long liquidation.
A firm US dollar, lower crude oil and sinking equities markets added pressure across grains markets.
Hard red winter wheat futures on the Kansas City Board of Trade guided wheat markets lower after findings on an annual Kansas wheat tour revealed very strong crop prospects in northern and central portions of the top wheat state.
Tour scouts pegged yield potential at 53.6 bushels per acre, sharply higher than last year's average of 40.0 bpa on the first day of the tour and topping the record high forecast of the tour's first day of 48.9 bpa in 2005.
"The best first-day tour yield indicates that we're looking at one state alone possibly posting a 400-million-bushel-plus wheat crop, which just adds to the global supplies that are already at record levels," said Terry Reilly, an analyst with Citigroup.
"The only thing that's keeping the wheat market up at these levels is the corn market. We expect a lot of feed-users to use as much wheat as possible this summer," he added.
Chicago Board of Trade May wheat fell 16 cents, or 2.5 percent, to $6.17-3/4 per bushel by 11:27 a.m. CDT (1627 GMT) while KCBT May wheat fell 15-1/2 cents, or 2.4 percent, to $6.30 a bushel. Losses in both markets were the steepest in three weeks.
Corn futures declined on strong US crop prospects as good rains forecast across the Corn Belt over the next week raised the likelihood of a record-large US crop that was believed to be about 60 percent planted.
Losses in nearby contracts outpaced those in deferred months an investors exited old-crop/new-crop spreads.
"A lot of the industry was long July and short December. They're now liquidating the spread," said Alan Kluis, president of Kluis Commodities.
"They're also thinking that early planted corn will be available by August and September so the need to have July corn trading at a $1 over December is not an argument that's going to stand any more.
CBOT May corn fell for a second straight day, shedding 15-1/4 cents to $6.44-1/2 a bushel, a 2.4 percent decline that was the largest in two weeks. New-crop December fell 5-3/4 cents, or 1.1 percent, to $5.33.
Early gains in soybeans, tied to another large soybean export sale announced on Wednesday, eroded at midmorning as traders liquidated long positions following the run to recent four-year highs. Spot month futures came within 3/4 cent of last week's peak at $15.09 before retreating.
The US Department of Agriculture confirmed the sale of 204,000 tonnes US soybeans to unknown destinations for 2012/13 shipment. The announcement came after USDA confirmed 330,000 tonnes in new-crop sales to China earlier this week.
CBOT May soybeans fell 3 cents, or 0.2 percent, to $14.94-3/4 a bushel, while November dropped 7-3/4 cents, or 0.6 percent, to $13.84-3/4.
Copyright Reuters, 2012