Commodity Blog

Commodity Prices – Wheat

Corn and wheat dropped today after the US Department of Agriculture predicted that global stockpiles will grow. Soybeans also declined. The USDA projected that world wheat inventories will increase by 1.5 million metric tons to 210.0 million in the 2011–12 season, global corn stockpiles will grow 1.0 million tons to 128.1 million tons and soybean ending stocks are projected to be higher by 45 million at 275 million bushels.

Earlier, the agricultural commodities were rising as adverse weather posed threat to crops in South America. Nevertheless, the estimates of the USDA showed that lower supply from the region will be mostly offset by production in other parts of the world.

Wheat slipped from $6.4125 to $6.0500 per bushel as of 23:47 GMT today on CBoT. Corn tumbled from $6.5125 to $6.1150 per bushel, while soybeans fell from $11.9775 to $11.7350 per bushel today.

Oil gained today on the positive data from the United States even as the US inventories increased. The Chicago Purchasing Managers’ Index was little changed at 62.5 in December, while a decrease to 60.4 was predicted by specialists, and pending home sales grew 7.3 percent in November, compared to the median forecast of 1.7 percent. Iran responded to the possibility of sanctions from the USA by threatening to stop supplies through the Strait of Hormuz. US stockpiles of crude increased by 3.9 million barrels to 327.5 million barrels last week. February futures for crude oil delivery advanced $0.29 (0.3 percent) to $99.65 per barrel on NYMEX. February contract for Brent oil gained from $107.43 to $107.96 per barrel on ICE as of 21:08 GMT today.

Wheat declined today on prospect for falling demand for the crop in the United States as well as for US exports in other countries. Algeria turned away from the USA to other exporters, Argentina among them perhaps, for supplying wheat. Analysts say that surging prices for the agricultural commodity is the main reason for slower demand. Wheat dropped from $6.4875 to $6.4500 per bushel on CBoT.

Commodities, including copper and oil, gained today on good news from Europe and the United States. The European politicians discussed on today’s summit ways to resolve the region’s debt problems and announced a range of measures, including leverage for the temporary bailout fund and an implementation of more permanent stability mechanism next year. The US consumer confidence improved this month, according to the preliminary estimate of the University of Michigan.

Agricultural commodities, specifically corn, soybeans and wheat, haven’t joined the rally as the US Department of Agriculture boosted its forecast for the next year’s inventories. The outlook for the global stockpiles of corn was 4.6 percent higher than in the previous estimate, for soybeans 1.5 percent higher and for wheat 2.9 percent above the previous forecast.

January futures for delivery of crude oil advanced $1.07 to $99.41 per barrel on NYMEX, while Brent jumped from $107.78 to $108.68 per barrel today as of 21:48 GMT on ICE. Copper rallied from $3.4720 to $3.5560 per pound on COMEX. Corn fell from $5.8900 to $5.8500 per bushel, soybeans slumped from $11.3100 to $11.0575 and wheat traded near its opening price of $5.7675 after falling to $5.6775 today on CBoT.

Corn and soybeans gained today on the speculation that the recent slump of the price will spur demand from makers of food and fuel. Prices for cattle and hogs jumped this year, potentially prompting farmers to increase their herds and to buy more animal feed as a result. The drought in Argentina can reduce supply, further boosting the agricultural commodity. On the other hand, forecasters say that the drought in Brazil may soon end and that can reduce the impact of lower supply from Argentina.

Corn was up from $5.8000 to $5.8575 per bushel on CBoT today, following the intraday drop to $5.7000 per bushel. Soybean price advanced from $11.2550 to $11.3000 per bushel today after falling earlier to $11.2025 per bushel.

Wheat was a different story as it declined on the forecast that the demand will decrease, while stockpiles will grow, yet the crop was also trying to erase its losses by the end of the trading session. Economists expect China to reduce its wheat import as the nation’s economy is slowing. Market forecasters predict that the report of the US Department of Agriculture on December 9 will show that the global wheat inventories rose 202.89 million tons, compared to the November estimate of 202.6 million tons.

Wheat closed at $5.9775 per bushel on CBoT down from the opening price of $6.0050, but significantly above the daily low of $5.8825.

Wheat was flat today after falling yesterday on forecasts of increasing supply.

The Grain Industry Association of Western Australia predicted that output from Western Australia may double to 9.24 million metric tons, above the 9.12 million tons estimated last month. Rainy weather in Argentina may help accelerate planting. Oil World forecast that Argentine farmers will increase sowing 6.8 percent to 4.87 million hectares (12 million acres).

Growing production in the Southern Hemisphere added to increasing supply from Russia and Ukraine. As a result, demand for the US wheat shrank. US exports are expected to drop to 26.54 million tons in the 2011–12 season from 35.1 million tons a year ago, according to the Department of Agriculture.

Wheat spot price was near its opening level of $6.1625 per bushel as of 8:09 GMT on CBoT.

Commodities gained today as Greece rejected the planned referendum and the European Central Bank lowered its key interest rate. Crude oil and wheat were among the gainers.

The referendum, promised by Greek Prime Minister George Papandreou, threatened the stability of the Eurozone. Some of the European leaders even spoke about expelling Greece from the European Union. Now tensions receded, reinvigorating markets.

Economists expected the ECB to keep the interest rates unchanged today. Many market participants were concerned that the rates are too high for the strained economy of the EU. The central bank, lead by its new President Mario Draghi, surprised everyone by cutting the main minimum bid rate by 25 basis points to 1.25 percent.

Wheat was down yesterday as the record harvest boosted the global stockpiles. International Grains Council estimated that output will increase 5 percent to 684 million metric tons in the 12 months ending June 30, pushing inventories to the highest level in a decade. The supply expanded as major wheat exporters, such as Russia and Ukraine, resumed their shipments after the drought last year.

Wheat was up today from $6.2300 to $$6.3575 per bushel as of 22:27 GMT on CBoT, following yesterday’s decline from $6.2900 to $6.2225 per bushel. Spot price for Brent crude jumped today $109.11 to $110.83 per barrel today on ICE, rebounding from the daily low of $107.83 per barrel.

Oil, nickel and wheat slumped today, followed by most other commodities, as the uncertainty about the future of the world economy damped global demand.

At present, the main driver for markets is the situation in Europe. The European leaders were meeting on the weekend and then yesterday, but it’s still unclear what measures will be taken to resolve all the difficulties region has encountered. The absence of clear answer to the issue of Europe keeps traders in depressed mood. The Standard & Poor’s GSCI Index fell 1.8 percent.

Oil also fell after the US stockpiles of crude increased more than was forecast. US crude oil inventories increased by 4.7 million barrels 337.6 million barrels from the previous week, while the increase by 500,000 barrels was anticipated by analysts.

Brent crude oil traded at $109.97 per barrel today as of 00:44 GMT on ICE, following yesterday’s drop from $110.85 to $109.50 per barrel. Nickel declined from $1008.50 to $973.50 per kilogram on MCX before trading today at $972.20 per kilogram. Spot price for wheat was $6.2375 on CBoT today per bushel after it fell from $6.3650 to $6.1950 yesterday.

Agricultural commodities declined today as the negative effect of yesterday’s monetary policy statement of the US Federal Reserve continued to affect markets today. The Fed announced its plan to replace the short-term securities with the longer-maturity debt and spoke about the ”significant downside risks” for the US economy. China’s Purchasing Managers’ Index fell to 49.4 in September from 49.7 in August, reinforcing the pessimistic sentiment among traders.

The Standard & Poor’s GSCI Index slumped as much as 5.2 percent. Silver, copper and crude oil were the major contributors to the decline. The Thomson Reuters/Jefferies CRB Index of slid 4.4 percent to the lowest level in nine months.

December contract for delivery of corn slipped $0.3575 (5.2 percent) to $6.50 per bushel by 13:15 on CBoT, the biggest decline since October 1. November futures for delivery of soybean fell $0.375 (2.8 percent) to $12.83 per bushel, following the drop to $12.81, the lowest price since March 15. Futures for delivery of wheat in December dropped $0.33 (4.9 percent) to $6.3375 per bushel, the biggest fall since June 30.

Wheat slumped today on the forecast that rains will ease drought in the US Great Plains. Mike Tannura, the president of forecaster T-Storm Weather, predicted storms may parts of Kansas, Oklahoma, Colorado and Texas may receive a half inch (1.3 centimeters) to an inch of rain by September 16. Rainfall would be welcomed by US farmers, who are just beginning to plant winter crops. Contract for delivery of wheat in December dropped $0.2525 (3.5 percent) to $7.02 per bushel as of 13:15 on CBoT, posting the biggest decline since September 1.

Gold futures today gained as concerns about the European sovereign-debt crisis strengthen. Greece’s budget deficit widened 22 percent over this year. German Chancellor Angela Merkel claimed she won’t let Greece to sink into “uncontrolled insolvency”, but such claims weren’t been able to convince many market participants. December futures for delivery of gold rose $16.80 (0.9 percent) to $1,830.10 per ounce by 14:01 on COMEX.

Signs of slowing global economy had a negative impact on markets. Copper and agricultural commodities were among losers.

Europe with all its problems is the main source of market pessimism. Finance ministers of Finland, Germany and the Netherlands will meet today to discuss Finland’s demand for collateral in a bailout for Greece. The Italian Senate will discuss the austerity plan, while the nation’s biggest union has called a strike.

The Standard & Poor’s GSCI Index of 24 commodities fell as much as 2.1 percent.

Some analysts think that copper may still rebound as supplies decline amid strike at mines and other problems.

December futures for delivery of corn dropped as much as $0.1325 (1.7 percent) to $7.4675 per bushel by 10:00 on CBoT. Futures for delivery of soybeans in November slipped $0.2775 (1.9 percent to $14.18 per bushel in Chicago. Futures for delivery of wheat in December subtracted 0.1775 (2.3 percent) to $7.5775 per bushel. Contract for delivery of copper in three months fell 1 percent to $8,870 per metric ton, the lowest intra-day price since August 25, before trading at $8,890.25 at 15:32 on LME.