Wheat Futures Plunge on Crop Improvement, Slack Exports
Wheat futures prices plummeted the permitted daily limit of 20 cents a bushel Wednesday on the Chicago Board of Trade as bigger crop prospects and slack export demand triggered heavy selling by speculators.
Reports of excellent yields in Nebraska, the Pacific Northwest and the southern Dakotas prompted speculation the Agriculture Department will raise its U.S. wheat production estimate in an Aug. 11 crop report.
On other commodity markets, copper futures rose sharply on news of stronger home sales; and natural gas, orange juice and lumber futures sank as Hurricane Erin softened its threat to homes and industry in Florida.
The Commodity Research Bureau’s index of 21 commodities dropped 0.92 point to 233.
Wheat for September delivery plunged 20 cents to $4.42 1/4 a bushel, a three-week low. The contract has fallen 38 1/4 cents, or about 8 percent, since hitting a 14-year high of $4.80 1/2 July 25.
Wheat futures skyrocketed in mid-July after the USDA predicted U.S. and global wheat reserves would hit their lowest levels in at least 20 years by next spring, largely due to a drop in U.S. production to 2.19 billion bushels, the lowest since 1991.
The high prices have choked off overseas demand for U.S. wheat, along with the USDA’s reluctance to subsidize export sales.
Against that backdrop, Wednesday’s reports of good yields and grain quality unnerved speculators who had bet on prices rising to $5 and even $6 a bushel.
Joel Karlin, research analyst with Kemper Securities Inc., predicted further selling.
``They might bring the December contract (which settled at $4.51 1/2 a bushel) down to the $4.20 level. It should find some support there,″ he said.
China, Egypt, Pakistan and Bangladesh all are believed to need wheat, but they may hold off on buying until newly harvested Australian and European supplies come on line next month, Karlin said.
Without a demand boost, wheat prices are unlikely to recover in the near term, said Joe Victor, marketing director for Allendale Inc., a commodities brokerage firm in Crystal Lake, Ill.
``We know world stocks are extremely tight but the market has virtually caved in,″ he said. ``We need some export business here.″
Copper futures rose on the New York Mercantile Exchange after the Commerce Department reported sales of new homes rose 6.1 percent in June to the highest level in a year and a half. The figures were the latest sign the economy bottomed out in the spring and has begun a modest recovery.
Demand for copper, which is used in wiring and plumbing, is closely tied to home construction.
August copper rose 5.45 cents to $1.402 a pound.
Orange juice, natural gas and lumber futures tumbled as tropical storm Erin was downgraded from a hurricane, reducing the threat of damage to buildings and orange groves in Florida, and to natural gas production in the Gulf of Mexico.
Frozen concentrated orange juice for September delivery dropped 3.35 cents on the New York Cotton Exchange to $1.031 a pound; September deliveries of spruce two-by-fours plunged $10 on the Chicago Mercantile Exchange to $255.70 per 1,000 board feet; September natural gas dived 3.7 cents on the New York Mercantile Exchange to $1.422 per 1,000 cubic feet.