Rise in wheat prices capped by export challenges

June 5th, 2014

By:

Category: Grains

(Reuters) – Chicago wheat futures edged higher on Thursday, consolidating after their longest losing streak in 20 years, as a generally favourable global crop outlook kept a lid on the market.

Corn prices were hovering just above the previous session’s more than three-month low, while soybeans were mixed as the huge old-crop premium began to be eroded.

Chicago Board Of Trade front-month July wheat rose 0.1 percent to $6.15 a bushel by 1053 GMT. A 0.3 percent rise on Wednesday ended the spot-month contract’s longest losing streak in 20 years at 10 straight days of lower finishes.

“The wheat market has come off as global production concerns are slowing,” said Brett Cooper, senior manager for markets at FCStone Australia.

“The fact is that U.S. wheat has been overpriced … it will find a floor when we start to get some new demand.”

U.S. wheat is facing stiff competition from rival exporters  such as Russia and Ukraine, which have been winning much of the tender business.

“Any strength in U.S. wheat prices would largely serve to make exports from the country uncompetitive. Therefore, we expect prices to be capped unless there is a supply shock elsewhere in the world,” Societe Generale said in a report.

November milling wheat in Paris rose 0.50 euros, or 0.3 percent, to 191.75 euros a tonne.

BENEFICIAL WEATHER

Corn prices were being held back by good growing weather across the U.S. Midwest. The U.S. Department of Agriculture (USDA) said on Monday afternoon that good-to-excellent ratings for corn were 76 percent, beating market expectations by 6 percentage points.

“While demand is strong, the overhang of a record or near-record U.S. corn crop has helped to keep corn prices capped. We expect this dynamic to continue in the foreseeable future,” Societe Generale said.

July CBOT corn was up 0.2 percent at $4.57 a bushel. The front month fell to a low of $4.54-1/4 on Wednesday; its lowest since late February.

CBOT soybean prices were mixed, with old-crop July off 0.2 percent at $14.79 a bushel while new-crop November  rose 0.3 percent to $12.20-1/2 a bushel.

Societe Generale said the supplies could be tighter than some expected in the 2014/15 season and new-crop prices were therefore undervalued.

“We project tighter inventories at the end of 2014/15 than the USDA and are, as a result, bullish on new-crop soybean prices,” it said.

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