Friday, August 6, 2010

Wheat Closes Limit Down

As foretold by the prophecy.*
[some prophecy, wheat was limit up yesterday -ed]
From Reuters:
Wheat hits loss limit after rally on Russia export halt
Wheat markets tumbled the daily limit on Friday, posting their biggest daily percentage loss in 14 months as investors took profits a day after pushing prices higher with Russia suspending grain shipments due to its worst drought in a century.
Traders were wondering "have prices gone up enough now to factor in the damage that has been done or are markets getting ahead of themselves?" said Dan Manternach, wheat analyst for Doane Advisory Services.
Chicago Board of Trade (CBOT) September and December wheat both fell by the maximum 60 cents, a day after finishing at the maximum daily gain. Front-month wheat futures fell 7.6 percent to $7.25-3/4 per bushel at 12:37 p.m. CDT (1:37 p.m. EDT). Minneapolis and Kansas City wheat also plunged near the daily loss limit.

"We didn't think it should have been this high anyway," said Joe Victor, analyst for Illinois-based research and advisory firm Allendale Inc.

Even after Friday's losses, the nearby contract remained on track for a weekly gain of nearly 10 percent.
Since prices bottomed on June 9 at $4.25-1/2 per bushel, wheat futures had gained 88 percent entering Friday's U.S. trading....MORE
Bloomberg's take: Wheat Falls Most Since Mid-2009 on Bets Farmers to Boost Acres After Rally
Wheat futures fell the most since mid-2009 on speculation that farmers will boost acreage next year after prices surged to a 23-month high following Russia’s ban on grain exports.

U.S. wheat yesterday traded at the highest premium over corn since April 2008 at export terminals in New Orleans, government data show. NYSE Liffe said the volume on its milling- wheat futures reached a record 74,729 contracts yesterday, when trading in Chicago was more than double the 30-day average.
“Buyers are not going to chase this rally, and farmers are going to plant a lot more wheat,” said Don Roose, the president of U.S. Commodities Inc. in West Des Moines, Iowa. “All of the volume indicators signal that yesterday may have been a buying exhaustion.”

Wheat futures for December delivery dropped 60 cents, or 7.4 percent, to close at $7.5525 a bushel at 1:15 p.m. on the Chicago Board of Trade. The decline was the most allowed by the exchange and the biggest for a most-active contract since June 3, 2009. For the week, the contract jumped 8.9 percent.

The price limit will expand to 90 cents when trading resumes at 6 p.m. on Aug. 8, after the first three contracts closed down the daily limit today, Mary Haffenberg, a spokeswoman for the CME Group Inc. said in an e-mail.

Price Doubles
Earlier, wheat reached $8.68, the highest level since Aug. 26, 2008. That was more than double this year’s low of $4.255 on June 9. The most-severe drought in at least 50 years slashed output in Russia, and adverse weather in Canada, Ukraine and the European Union hurt crops....MORE
*When MarketBeat gets around to putting up a wheat post we should be looking for a lock limit-down day.
-from the post "Climateer Line of the Day: Staff of Life Edition"

Okay, so I left some "dough" on the table had I caught the absolute top-tick.
On the other hand, how may commentators used this graphic? From Monday's "Wheat Closes on $7.00/Bushel Getting Close to a Top (ZWU0; WEAT)":
The September contract is up another 4% at $688.750.
One of these days the market is going to have a collective Wile E. Coyote moment:

Wile E. Coyote 

U.S wheat stockpiles (ending stocks) will come in at approximately 1.1 Billion bushels. This is enough to make up for any Russian shortfall. Worldwide, it is a logistics rather than a supply question. Cargill, Bunge and the rest of the grain guys seem pretty competent at moving stuff around.

The  wildcard is Australia. Should it not be able to step up exports there could be localized shortages.
On the other hand La Niña tends to be positive for Australian wheat and could add a million or two metric tonnes.

The next USDA report is due on August 12.