WHEAT MARKETS tumbled by the maximum allowable yesterday one day after Russia’s grain-export ban sparked a scramble for supplies. The markets posted their biggest daily percentage loss in 14 months as investors reaped profits.
Traders were wondering “have prices gone up enough now to factor in the damage that has been done or are markets getting ahead of themselves?” said Dan Manternach, wheat analyst for Doane Advisory Services.
Chicago Board of Trade (CBOT) September and December wheat both fell by the maximum 60 cents, a day after finishing at the maximum daily gain.
Minneapolis and Kansas City wheat also plunged near the daily loss limit. “We didn’t think it should have been this high anyway,” said Joe Victor, analyst for research and advisory firm Allendale.
Even after yesterday’s losses, the nearby contract remained on track for a weekly gain of nearly 10 per cent.
Since prices bottomed on June 9th at $4.25-1/2 per bushel, wheat futures had gained 88 per cent entering yesterday’s US trading.
Chicago September corn prices fell 1.1 per cent to $3.99 per bushel, following wheat lower amid profit-taking and hedge selling, while August soybeans slipped 0.1 per cent to $10.54 per bushel.
Wheat prices remain well off the 2008 highs of $13.34-1/2 per bushel, hit when fears of a global food crisis roiled the markets. World wheat ending stocks in 2007/08 were one-third lower than the 187 million tonnes projected in July by the US
The Organisation for Economic Development and Co-operation (OECD) said yesterday that the current situation is not comparable to the 2007/08 crop year.
While there is no world wheat shortage, it is too early to say the rally is over as the lingering Russian drought poses a threat to winter wheat planting in September, Mr Manternach said.
Russia will honour its current grain export obligations only after the harvest is completed and the crop situation is more clear, said First Deputy Prime Minister Igor Shuvalov.
“The statements [that] Russia will honour current contracts and will evaluate resuming exports after harvest I think takes a little pressure off these markets. People are starting to take profits and the question now is how much lower will it go,” said Joe Bedore, from trading house FC Stone.
But traders cited concerns that Kazakhstan and Ukraine, also hit by drought, may curb exports.
“There are doubts about the whole Black Sea zone,” said one futures dealer.
Two global suppliers cancelled deals to ship some 65,000 tonnes of Black Sea wheat to Bangladesh, according to a Bangladeshi importer.
“If you see a lot of exporters declaring force majeure, that is likely to spook the market a bit and if you see neighbouring countries like Ukraine and Kazakhstan putting any similar export restrictions in place, I think that could add further fuel to the rally,” Barclay Capital’s Sudakshina Unnikrishnan said. – (Reuters)
