US wheat futures fell 9 percent on Thursday in a sharp pullback after a trader for MF Global placed then lifted a huge position in the market at mid-week, driving prices sharply lower, traders and analysts said.
"I would definitely agree that there was some profit-taking and long-liquidation in wheat because of the MF Global situation. The volatility we've seen has just shown everyone how dangerous the market can be," said Gavin Maguire, analyst for Iowa Grain.
Chicago Board of Trade wheat closed 46 cents at $1.11 per bushel lower, with March down $1.11 at $11.69 per bushel. "Also, timing is key. Some people are taking profits because it's the end of the month and they're ready to start March with a clean slate," Maguire said.
Trading was expected to remain volatile amid continued speculative activity, traders said. The market was abuzz with talk about brokerage MF Global saying it recorded a bad-debt provision of about $141.5 million after one of its representatives trading in the wheat market substantially exceeded his authorised trading limit.
A failure in one of the company's retail order entry systems allowed the representative to establish significant positions in is own account which were sold on Wednesday, the company said in a statement.
Weekly export sales for last week announced by the US Agriculture Department totalled 328,600 tonnes, within the range of estimates for 150,000 to 400,000 tonnes. On Wednesday, Japan's Agriculture Ministry cancelled a tender to buy wheat, citing high prices.
In Asian trade, CBOT soft red winter wheat was down 19 to 58 cents per bushel, Kansas City Board of Trade hard red winter wheat was down 5 to 52 cents and Minneapolis Grain Exchange spring wheat was unchanged to down 51 cents. Daily price limits for March CBOT and KCBT contracts were removed starting on Thursday, first position day for deliveries. Expanded limit of $1.35 remains in deferred months. There were no limits on March MGE spring wheat, and deferred months were trading with $2.02-1/2 per bushel limit.