Wheat futures at the Chicago Board of Trade shed 3 percent in value and closed sharply lower on Tuesday, as improving US harvest weather prompted speculative selling, traders said. A government projection for a large Australian wheat crop also weighed on the market, as did a report of strong crop prospects in Germany.
Those outlooks helped soften fears about tightening world wheat supplies, which last week drove US wheat futures to their highest levels since 1996. A plunge in CBoT corn futures to their 20-cent daily trading limit added pressure as well.
CBoT July wheat closed down 20 cents, or 3.3 percent, at $5.81 per bushel. Deferred months ended down 10 to 21-1/2 cents, with September down 20-1/2 at $5.97 and December down 21-1/4 at $6.01-1/2.
Commodity funds sold an estimated 6,000 contracts, traders said. Volume was heavy, estimated by the CBoT at 122,243 wheat futures and 13,019 options. Weather was a focal point. The southern US Plains was expected to see a break in the rains later this week, which should help accelerate the harvest of hard red winter wheat, the largest US wheat class.
"There also was some sprinkling of rains in Australia and the Ukraine. Both of those areas have been dry recently, both of them are major wheat producing areas and both of them look like they're going to get a bit of rain," said Gavin Maguire, analyst with Iowa Grain. The Australian government on Tuesday projected that country's wheat crop to more than double this year, to 22.5 million tonnes.
A large Australian wheat crop could help ease worries about tightening global wheat supplies. The USDA has projected that world wheat ending stocks will drop to 30-year lows by the end of the 2007/08 marketing year, due in part to drought in eastern Europe.
In western Europe, German trading house Toepfer International estimated Germany's 2007 wheat harvest at 21.5-22.3 million tonnes, up from a May estimate of 20.8 million tonnes. Rains in much of Germany since May had improved wheat prospects after earlier droughht, the firm said in a report. US traders shrugged off bullish data in the US Department of Agriculture's weekly crop progress report, saying it had been expected.
USDA late Monday said the US winter wheat harvest was 11 percent complete, well below the five-year average of 20 percent. Harvest was expanding into the soft red winter wheat belt, with the crop 39 percent cut in Illinois and 18 percent cut in Indiana.
The winter wheat crop was rated 50 percent good to excellent, down from 52 percent last week. Spring wheat ratings improved, with 85 percent of the crop rated good to excellent, up from 81 percent a week earlier. In export news, Japan said it offered to buy 93,500 tonnes of US, Canadian and Australian wheat at its weekly wheat tender.
CBoT July wheat stayed above all key moving averages. The contract's nine-day relative strength index stood at 82 ahead of the open, in technically overbought territory, but fell to 66 by the close. Technical traders view an RSI of 70 or higher as an overbought signal.