Plains rains slam wheat futures
U.S. wheat futures fell to a seven-month low Tuesday as rain and snow eased drought conditions in the southern Plains.
The wet weather combined with concerns about weak export demand to push prices lower, as speculative traders likely added to their bets on lower prices, traders said. Corn and soybean futures also fell amid negative technical signals and general pessimism about agricultural commodities.
"These ag markets are just getting hammered today," said Chad Henderson, president of brokerage Prime Ag Consultants in Brookfield, Wisc.
Wheat futures for March delivery fell 9 1/2 cents or 1.3% to $7.32 a bushel at the Chicago Board of Trade, the lowest settlement for the front-month contract since June 28.
KCBT March wheat fell 10 3/4 cents or 1.4% to $7.78 a bushel. MGEX March wheat fell 10 cents or 1.2% to $8.16 a bushel.
Precipitation in the southern Plains on Tuesday slightly eased concerns about the threat to crops, leading to pressure on wheat futures.
The soil in Kansas and surrounding states has been parched since the severe U.S. drought last summer. Rain and snowfall during the winter has been insufficient to ease the dry conditions, posing a threat to the wheat crops that will emerge from dormancy in the region this spring.
An average of one-half to three-quarters of an inch of rain and snow fell in northern Texas and western Oklahoma on Monday night and Tuesday, said Joel Widenor, a meteorologist with private forecaster Commodity Weather Group LLC in Bethesda, Maryland. In current forecasts, parts of Kansas and Colorado are likely to receive another one-quarter to one-half inch of precipitation in the middle of next week, he said.
The current weather isn't enough to make up for the highly depleted soil moisture in the Plains. Last week, more than one-third of Kansas was experiencing drought of a level statistically expected upward of every 50 years, according to the U.S. Drought Monitor map.
But the precipitation still increased pessimism about wheat prices, especially when combined with concerns about weak export demand.
Export demand for U.S. wheat has remained tepid so far this year despite its price having fallen, making it more competitive against supplies from other countries.
In a research note sent to clients on Friday and reporters this week, Goldman Sachs Group Inc. analyst Damien Courvalin slashed his three-month price forecast for Chicago wheat futures to $7.80 a bushel, citing a current weak export outlook. A month ago, his three-month forecast was $9.50 a bushel.