Spring wheat futures on the Minneapolis Grain Exchange fell to 2-1/2 month lows on Tuesday, pressured by fund selling and talk of quality problems in the US spring wheat crop, traders said.
"They're running into serious problems in the harvest up there. Bad quality that means you have to discount the price to get it moved," O'Connor and Co analyst Charlie Sernatinger said.
Traders cited problems with vomitoxin, a by-product of a fungal disease known as scab that has cropped up in spring wheat fields this summer in top US producer North Dakota.
MGE September wheat ended down 7 cents at $3.37-1/4 per bushel after dropping to $3.36-1/2, its lowest level since May 20. Sell-stops were triggered at $3.39-1/2 and $3.39 in the session.
December ended down 5 at $3.46-3/4. The exchange estimated volume at 7,682 contracts, up from 4,418 lots on Monday. Country Hedging was the day's featured seller of about 1,000 December contracts, traders said.
USDA said 23 percent of the spring wheat crop was harvested as of Sunday, up from 7 percent the previous week and the five-year average of 20 percent.
The North Dakota State report said scab continued to show up in varying degrees of severity in wheat and barley fields.
Also bearish was news that the United States would lower duties on Canadian hard red spring wheat in response to a North American Free Trade Agreement panel decision in March.
The Canadian Trade Department said the US Department of Commerce had decided it would cut current countervailing duties to 2.54 percent, from 5.29 percent.
However, the United States has an additional 8.86 percent anti-dumping duty. The nine-day relative strength index for the September contract closed on Tuesday at 31, approaching the benchmark of 30 considered by chartists as one sign of an oversold market.
An RSI of 70 or higher signals an overbought market. Position squaring continued ahead of the US Department of Agriculture's August supply/demand report, scheduled for release on Friday.
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