Commodity Blog

Commodity Prices – Wheat

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.

Wheat futures fell today as weather forecast improved prospects for US crops, while increasing output from Russia and Eastern Europe may decrease demand for US exports.

Harvest in the US was threatened by drought. Recent rains in parts of the Midwest eased concerns about the current harvest and planting of winter wheat.

The government newspaper Rossiyskaya Gazeta reported today that Russia may harvest more than 90 million metric tons of wheat. Wheat profited from the ban of exports by Russia last year, but as the nation ended the ban the grain is under pressure.

December settlement for wheat slipped $0.0425 (0.5 percent) to $7.9075 per bushel as of 13:15 on CBoT.

Wheat gained today as adverse weather in the US decreased potential yield. Ivory Coast also has bad weather and cocoa advanced on concerns about supply.

Last week’s storms brought lesser amount of precipitation to some areas of the US, while some areas were avoided by rains altogether. Allen Motew, meteorologist with QT Weather, some parts of west-central Illinois, northern Iowa and southern Minnesota received less than 25 percent of normal precipitation since August 1.

Ivory Coast also has problems with drought, but in addition crops suffer from lack of sun and low temperatures. The plants need mixture of sunny and rainy weather, whether currently they receive neither.

December futures for delivery of cocoa rose $43 (1.4 percent) to $3,047 per metric ton by 12:17 on ICE. December futures for delivery of corn went up $0.0925 (1.3 percent) to $7.345 per bushel as of 13:15 on CBoT.

Corn and wheat retreated today on the forecast rains will help boost growth of the crops. Previously traders were concerned that drought would damage plants. Now forecasts promised rains in the US Midwest over next several days. December futures for delivery of corn fell $0.08 (1.1 percent) to $7.175 per bushel at 11:40 on CBoT. Contract for delivery of wheat in December slipped $0.1525 (2 percent) to $7.4275 per bushel.

Rubber erased some of its losses as the threat of adverse weather reducing supplies from Thailand overshadowed concerns about possible slowdown of the global economic growth. 60 percent of Thailand’s south received heavy rainfalls. Rubber is still down over the trading session as the yen strengthened, reducing attractiveness of commodities prices in the Japanese currency, and oil fell 1 percent to $86.70 per barrel. January delivery for rubber subtracted 1 percent to 33,745 yuan ($5,283) per metric ton on Shanghai Futures Exchange.

Wheat gained today on the speculation hot weather and drought in the US will reduce output.

Amount of precipitation in some parts of the US was only quarter compared to the normal for this part of the year. Crops were already harmed by adverse weather in the second part of the last year. The US Department of Agriculture predicts output of hard, red-winter wheat may shrink 22 percent, compared to the previous year, to 794.4 million bushels as a result.

Futures for delivery of wheat in December gained $0.0725 (1 percent) to $7.5925 per bushel as of 10:31 on CBoT after it earlier reached $7.6775, the highest price for a most-active contract since June 14. Over the year wheat rose 8 percent.

Gold futures retreated from the record, showing the biggest drop in 7 weeks, after COMEX boosted margin requirements. CME Group Inc. (owner of COMEX) increased margin required to trade gold contracts by 22 percent. As a result, traders liquidated their positions en masse. The situation reminds the one with the silver earlier this year, when the increase of margin requirement put an end to the impressive rally of silver and caused a hit to the precious metal, from which it still hasn’t recovered. Gold looks too strong to fall in a same way. Moreover, the margin increase occurred when the yellow metal had a clearly bullish trend, while silver was caught by the CME decision during a correction. Still, caution is advised. December futures for gold delivery fell $32.80 (1.8 percent) to $1,751.50 by 13:39 on COMEX.

Corn, soybeans and wheat gained today as the US Department of Agriculture cut its forecast for harvest. The USDA decreased its estimates compared to July predictions because of excessively hot weather in parts of the US. Estimates for corn were lowered by 4.1 percent, for soybeans by 5.2 percent and for spring harvest of wheat by 5.2 percent. December futures for delivery of corn rose $0.255 (3.7 percent) to $7.14 per bushel as of 13:40 on CBoT. November futures for delivery of soybeans gained $0.3025 (2.3 percent) to $13.3175 per bushel. Contract for delivery of wheat in December advanced $0.1375 (1.9 percent) to $7.33.

Crude oil gained as the US inventories declined. US stockpiles of crude fell by 3.7 million last week as refineries operated at 90.3 percent of capacity, the highest rate in 11 months. August for crude oil delivery advanced $0.64 to $98.14 per barrel on NYMEX.

Wheat posted today the biggest gain in a weeks as the dollar weakened and on the forecast that supply from Europe will decrease. Droughts in spring already reduced expected yield in Europe and now heavy rains can harm quality of the grain. September futures for delivery of wheat gained $0.0725 (1 percent) to $7.0075 per bushel by 10:33 on CBoT.

Copper fell today after the report showed an unexpected decline of existing home sales in the US, the biggest consumer of the metal in the world. US existing home sales decreased from 4.81 million to 4.77 million in June. September futures for delivery of copper slipped $0.032 (0.7 percent) to $4.436 per pound as of 13:22 on COMEX.

Copper climbed today as economic data signaled that the US hosing market is recovering. Housing starts climbed from 549,000 to 629,000 and building permit advanced from 609,000 to 624,000 in June. Tomorrow, the report about existing home sale is expected to show an increase from 4.81 million to 4.92 million. September futures for copper delivery climbed $0.0515 (1.2 percent) to $4.4545 per pound as of 7:44 on COMEX.

Wheat advanced today to the highest level in a month as cattle breeders may turn to the grain as an alternative feed after corn price surged. Prices for corn jumped to the highest level in five weeks on the forecast that hot weather in the US will reduce yields. September futures for delivery of wheat rose $0.2 (2.9 percent) to $7.095 per bushel by 11:55 on CBoT.