Wheat declines on 'excessive' rally

SINGAPORE - Wheat futures fell for a third day on speculation that a recent rally may have been excessive. Corn and soybean futures also declined.

September-delivery wheat dropped 1.1 percent to $5.8325 a bushel on the Chicago Board of Trade at 11:30 am Singapore time. Futures jumped 38 percent from June 9 through Monday as drought in Russia and parts of Europe and excessive rains in Canada damaged crops.

Wheat's 14-day relative strength index, a gauge some investors use to judge price movements, dropped to less than 70 on Tuesday for the first time since July 7. Some traders use an RSI level of more than 70 as a signal that a contract is set to fall.

"At this point, traders look to be taking a bit of a step back from the recent global production concern-driven rally," Phillip Futures Pte Ltd said in an e-mailed note to investors on Tuesday. Still, there remains some "upside potential" as producing countries face weather-related problems, it said.

Wheat areas in northern Argentina are likely to remain dry through Wednesday, Accuweather.com said in a forecast issued on Monday. The harvest in Argentina, South America's largest exporter, was forecast to rise to 12 million metric tons in the 2010-2011 year from 9.6 million a year earlier, ending two years of declines, according to a US Department of Agriculture estimate on July 9.

The area planted to wheat in Argentina shrank to 3.2 million hectares in the 2009-2010 season, the smallest since at least 1960, the oldest data on the USDA website.

"Argentina has emerged as the latest country to face potential setbacks over wheat, with adverse weather threatening its recovery from century-low plantings," Philip Futures said.

Russian drought

Wheat prices in the European part of Russia rose 15 percent to 4,850 rubles ($160.57) a metric ton by July 23 from a week earlier, on concerns that drought will curb supply, SovEcon the Moscow-based research center, said on its website. Russia was the world's third-largest wheat grower in the 2009-2010 season, according to the USDA.

Bangladesh, South Asia's biggest importer, is seeking to buy 100,000 tons of wheat through two tenders, the nation's Directorate General of Food said.

Wheat yields in North Dakota, the biggest US producer, may drop this year from a record in 2009 because of excessive rain during April planting, said Darin Jantzi, director of the National Agriculture Statistics Service's North Dakota office. The US is the world's largest exporter.

Corn for December delivery lost 0.3 percent to $3.7675 a bushel, after declining as much as 0.4 percent earlier. November-delivery soybeans fell 0.2 percent to $9.64 a bushel, reversing an earlier 0.2 percent gain.

Bloomberg News

(China Daily 07/28/2010 page16)