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Morning markets: wheat drops to five-week low

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Farm commodities recovered from early lows, helped by revival in oil, but not before wheat had dropped to a five-week low.

The grain has come under pressure from high global stocks and expectations of a decent harvest in many countries. While the US winter wheat crop has been troubled by weather, the condition of its spring wheat is well above average.

Furthermore, with winter wheat harvest underway, many farmers have been keen to cash in at current prices which, while below a recent peak of $6.77 a bushel, and way down last year's spike above $13 a bushel, are high on a historic basis.

Chicago wheat for July delivery hit $5.59 a bushel during electronic trading in Asian hours, its lowest since May 7, before recovering some ground to $5.62 ¾ a bushel at 06:15 GMT.

Oil factor

The recovery was helped by a rebound in crude, which had lost ground early on following American Petroleum Institute data showing a smaller-than-expected drop in crude stocks last week and a rise in petrol inventories.

New York crude for July, which had dropped to $69.91 a barrel, revived to $71.10 a barrel, up $0.63 on the day.

Crude is a key indicator for crop prices, not just as flagship commodity, but as a steer as to demand for the biofuels being increasingly produced from the likes of corn, sugar and rapeseed oil.

Indeed, corn also recovered from a negative start to stand 0.5 cents higher at $404 ½ a bushel.

Soybeans, which continue to be boosted by expectations of a market squeeze, rebounded off the $12 a bushel mark to $12.06 ¼ a bushel, up 5 cents on the day.

Celebration time?

In Kuala Lumpur, palm oil edged 2 cents into positive territory at 2,402 ringgit a tonne in the morning session on Bursa Malaysia's Derivatives Exchange.

Traders noted some hope of a revival in demand fostered by the Asian festival season.

"The expectation is that China, India and Pakistan will have to consider stocking up for festivals starting in August," a trader said.

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