(Agrimoney) – Wheat prices renewed their decline in a drop attributed to an improved US weather forecast, supercharged by declines in some other risk assets.
Chicago’s May wheat contract slumped 3.7% at one stage -losing half the ground recouped during its recovery from a nine-month low recorded at the start of the month.
The decline was seen reflecting ideas that another wave of cold US weather this week will not, as many investors had feared, threaten further damage to winter wheat crops in the southern Plains which, having emerged from dormancy, are more liable to frost.
“Cold temperatures in the south western Plains Thursday and Friday mornings will likely result in some additional spotty damage to jointing wheat,” weather service MDA said.
“However, no significant or major damage is expected, as readings should be a bit warmer than during the cold outbreak last week.”
At broker Newedge, Dan Cekander said: “The markets have reacted to the reduced freeze threat for this week in the hard red winter wheat area.”
More snow
Furthermore, the forecast is bringing more precipitation to areas of the central Plains, such as Nebraska, where last year’s drought has persisted.
Weather models are “forecasting large areas of 4-12 inches of snow across eastern Wyoming, all of South Dakota, the western half of Nebraska into all of Minnesota, Wisconsin and northern half of Iowa,” Dave Tolleris at WxRisk.com said.
“Embedded in that area is a region of 8-12 inches over the northwest third of Nebraska much of central and eastern South Dakota and over central Wisconsin.”
The prospect of precipitation in the western Corn Belt, where drought also remains an issue, weighed on corn too, which for the new crop December lot tumbled 3% at one point back to within $0.05 a bushel of nine-month lows.
Cross-market contamination?
Other factors seen undermining the market included disappointing Chinese economic growth data, which depressed prices of many assets, and was seen as playing a part in an 8% rout in gold.
“We may be seeing forced liquidation in other markets making itself felt in wheat,” Brian Henry at Benson Quinn Commodities said, adding that technical factors may have played a part too, with Chicago wheat falling back below all major moving averages.
“It is not hard to find institutional investors who at the first sign of a hiccup, are keen to get out.
“We may be getting a few different factors lined up to cause today’s fall.”
However, he added that he was surprised by the extent of the decline, saying that wheat “looks to have value” at Monday’s levels, and pointing to the announcement of the sale of 480,000 tonnes of soft red winter wheat to China.
Spring wheat threat
However, prices of Minneapolis-traded spring wheat held relatively firm, as the snows seen refreshing Nebraska were viewed as only worsening prospects for seedings further north.
“Spring wheat planting is still a long way off,” Gail Martell at Martell Crop Projections said.
“Fields are still frozen and snow covered in North Dakota and Western Minnesota, key spring wheat areas.
“Saskatchewan, Canada’s leading wheat province, is still buried beneath a thick blanket of snow.
“In a northern climate where the growing season is relatively, any delays in planting are a threat to the crop.”
