Egypt and other major buyers cancelled shipments totaling nearly 500,000 tons of wheat on Thursday, sending wheat futures spiraling down, reports Bloomberg News. Chicago Board of Trade wheat futures for December 2010 delivery dropped to 22.5 cents to $6.9725 per bushel. The contract set a two-year high of $8.68 per bushel on August 6.
Wheat prices surged after drought and faltering rainfall in Russia devastated the Black Sea region, causing fires and blighting crops. Russia responded by banning all grain exports until 2011, which drove buyers like Egypt to the U.S. for grain. Ukraine also limited its exports.
But prices have risen so high, apparently, that those buyers aren't willing to go through on their orders.
"The exports have been disappointing the past two weeks," Larry Glenn, an analyst at Frontier Ag in Quinter, Kansas, told the news service. "There have been some sizeable cancellations."
Another bearish signal for wheat futures is a growing U.S. crop, which the research firm Informa Agriculture projects will increase to 2.224 billion bushels in the year that ends May 31, up from 2.216 billion in the previous year.
This material is conveyed as a solicitation for entering into a derivatives transaction.
This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.
Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.