Soft red winter wheat futures on the Chicago Board of Trade fell to four-week lows on Tuesday in a fund-led sell-off prompted by harvest pressure and a broad downturn in commodities, traders said.
Grains, precious metals and crude oil prices all declined after US Federal Reserve Chairman Ben Bernanke on Monday said the US central bank needed to remain vigilant on inflation. The comments lifted the US dollar, pressuring commodities.
The Reuters/Jefferies CRB Index of 19 commodity futures closed at 344.78, down 4 points or 1.15 percent.
"We've got fund liquidation everywhere. It's a general 'get me out' type day," Linn Group grain analyst Roy Huckabay said. At the CBOT, July wheat settled 13-1/2 cents lower at $3.85 per bushel after falling to $3.83, its lowest level since May 9. Deferred months ended down 12 to 15 cents.
Volume wasures on Monday. Futures fell to session lows toward the close on technical selling. Funds sold at least 5,000 contracts on the day, traders said.
Also bearish was a big hike in the CBOT's margin requirements for wheat, which prompted some traders to liquidate long positions. The exchange said initial margins on wheat would rise from $878 per contract to $1,283 as of Tuesday's close.
"That definitely got the market's attention," said Joe Victor, analyst with Allendale Inc.
"It's not just the weak longs, but some of the other major funds that have gotten into this market - now they get the news that initial maintenance and hedge margins just went up over 40 percent. That put a little pressure in the market," Victor said.
Wheat futures faced seasonal pressure from the expanding US harvest. Private forecaster Meteorlogix said conditions would be hot and mostly dry for the next 10 days in the Plains hard red winter wheat belt, ideal for harvesting.
The US Department of Agriculture said the US winter wheat crop was 9 percent harvested as of Sunday, ahead of the five-year average of 5 percent. The harvest was 26 percent complete in Texas and 48 percent complete in Oklahoma.
Traders shrugged off declines in condition ratings for the US winter and spring wheat crops. The USDA said 27 percent of the winter wheat crop was rated in good to excellent condition, down from 28 percent the previous week. But winter wheat ratings are losing significance as the harvest progresses.
The USDA said 69 percent of the US spring wheat crop was rated good to excellent, down from 73 percent a week earlier.
Crops were off to a good start in parts of Canada. A weekly report from the Canadian province of Saskatchewan said 88 percent of the spring and durum wheat crops were rated in good to excellent condition.
Concerns about dry weather in Australia remained a bullish background factor. However, the Australian Bureau of Agricultural and Resource Economics said it was too early to predict cuts in winter crop production. The bureau will release crop forecasts on June 20.
Overnight export news was routine. Japan said it planned to buy 106,000 tonnes of US, Canadian and Australian milling wheat at its weekly tender on Thursday, while Taiwan millers bought 70,470 tonnes of US wheat.