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Morning markets: battered wheat dusts itself off

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Wheat started the note on a modestly better note, helped by a touch of bargain hunting, while vegetable oil crops weakened, notably palm oil, which slumped 3.5%.

Chicago wheat for December picked itself up from its 5% plunge in the last session to post a 3.25 cent gain to $4.53 a bushel by 06:30 GMT on Monday.

Some traders with short positions booked profits. However, the revival also represented some home by bulls that $4.50 or so is something of a floor for wheat.

While it fell just below that support level on Friday, that was the first time since its bear run, which started in early June, began to run out of steam two weeks ago.

Regulatory threat

Although the world is relatively richly supplied with wheat, there is an argument that this is reflected in prices, which have returned to levels in line with those before the spike starting in the second quarter of 2007.

One wild card is the risk of fresh regulatory moves aimed at limiting future spikes and ensuring better convergence between wheat futures and cash prices.

One measure proposed last week by the Commodity Futures Trading Commission, the US regulator, was a system of variable storage rates for wheat.

Analyst comments

Wheat appeared to have passed its misfortune on to palm oil, which slipped after Dorab Mistry, a leading analyst, forecast a short-term fall potentially to 1,900 ringgit a tonne in Kuala Lumpur prices, albeit before a recovery next year.

Prices would need to drop to "keep stocks under control", he said, before the hangover of El Nino revived the market next year by damaging production.

December palm ended the morning session on the Bursa Malaysia Derivative Exchange down 65 ringgit at 2,121 ringgit a tonne, after touching 2,101 ringgit a tonne earlier.

Rains weaken

Soybeans, the source of rival soyoil, were a little out of favour too, depressed by palm oil and the growing prospect of a huge US crop.

The rains which held up early harvesting in parts of the Midwest and Mid-South at the end of last week looked to have done their worst, with drier conditions moving in which will allow the show to get back on the road.

Soybeans for November stood 10.5 cents lower at $9.15 ½ a bushel, within 2% of a five-month low.

Corn for December, meanwhile, lost 2 cents to $3.32 ½ a bushel, with apparently little prospect of a frost striking to damage US crops.


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