Wheat futures on the Chicago Board of Trade plummeted on Friday, despite a monthly US Department of Agriculture crop report that confirmed tightening US and world wheat supplies.
Wheat futures on the Chicago Board of Trade briefly fell the daily limit of 30 cents per bushel, after closing limit-up the previous day, heading into the monthly report. "Wheat is just going to be volatile, and today you could say it was buy-the-rumour and sell-the-fact," said Prudential Financial analyst Shawn McCambridge.
CBOT December wheat fell 25-1/2 cents to settle at $8.57-1/2 per bushel, after falling the 30-cent limit to $8.53 in the opening minutes of trade. March ended down 25-1/2 cents at $8.73 while new-crop July was down 5-1/2 at $6.80-1/2, gaining against old-crop months on spreads.
Funds sold 4,000 contracts, traders said. The CBOT estimated wheat volume at 69,461 futures and 17,040 options. USDA lowered its estimate of world wheat production to 600.5 million tonnes, down 5.8 million tonnes, and slashed its wheat crop forecast for key exporter Australia to 13.5 million tonnes, from 21 million in September, due to drought.
USDA's Australia figure was below the Australian government's September 18 estimate of 15.5 million tonnes but came near the latest private estimates. USDA also projected that global wheat stocks would fall to 32-year lows by the end of the 2007/08 marketing year, at 107 million tonnes. US wheat ending stocks for 2007/08 were projected at 307 million bushels, the lowest since 1948/49.
However, traders said the numbers were close to expectations and had already been factored into wheat prices ahead of the report. "The market had been building up in full anticipation of a bullish report, but instead we got a modestly supportive report. That was not what was needed to spur a further rally," said Iowa Grain analyst Gavin Maguire in Chicago.
Traders were also looking ahead to the next crop year, which should involve a global expansion in wheat plantings. "We all know that whatever high the wheat market makes, if that isn't already in...that from here we will decline on the dramatic world increase in production that is forthcoming," said Dan Basse, president of AgResource Co.
CBOT wheat futures have come down from all-time highs approaching $10 a bushel in late September due to crop shortfalls in Europe, Canada and Australia. Kansas City Board of Trade December hard red winter wheat ended down 18-1/4 cents Friday at $8.67-3/4 per bushel and December spring wheat futures on the Minneapolis Grain Exchange fell 20-3/4 cents to close at $8.70.
European wheat markets turned lower, following Chicago. In Paris, November milling wheat futures ended down 2.75 euros or 1.1 percent at 246.25 euros per tonne. In other wheat news, the French farm ministry cut its soft wheat production estimate to 31.3 million tonnes, from 31.7 million last month, and down 6 percent from last year.
In Australia, good rainfall in the country's north-east grain belt in the past week came too late to help the wheat crop as harvesting began, but lighter rain in the south did benefit drought-hit crops.