Wheat prices fall on concern US may change index-fund rules
Sunday, 26 July 2009
CHICAGO, July 25 (Bloomberg): Wheat prices fell the most this month on speculation that some investors will unwind futures positions should the US government impose trading curbs on index funds.
Waivers that let index traders exceed position limits may be phased out, Gary Gensler, the Commodity Futures Trading Commission chairman, told a Senate hearing this week. The goal is to narrow the spread between cash prices and futures, he said. Less index investment may depress prices, analysts said.
"That could have a short-term effect," said Jamey Kohake, a Paragon Investments broker in Silver Lake, Kansas. "We could see heavy liquidation."
Wheat futures for September delivery dropped 15.5 cents, or 2.9 per cent, to $5.1625 a bushel on the Chicago Board of Trade. The drop was the biggest for a most-active contract since June 30.
The grain declined 4.7 per cent this week. Futures are down 34 per cent in the past year, partly on reduced demand for supplies from the U.S., the world's largest exporter.
Larger fund managers "want the open interest to stay high, they want speculation in the market," Kohake said.
The price also dropped on speculation that the winter-wheat crop in Kansas, the largest U.S. producer, will top estimates by the government and analysts. Growers may collect as much as 370 million bushels in the state, said Darrell Holaday, the president of Advanced Market Concepts in Manhattan, Kansas.
On July 10, the U.S. Department of Agriculture forecast 360.8 million bushels. In May, before the winter-crop harvest began, analysts estimated 338 million, on average. Yields in the state were projected at 41 bushels an acre, the USDA said.
"It got better, especially by the Kansas-Colorado border," Kohake said. "I'm hearing about 50- to 80-bushel yields" an acre, he said.
Wheat is the fourth-biggest US crop, valued at $16.6 billion in 2008, behind corn, soybeans and hay, government data show.
Waivers that let index traders exceed position limits may be phased out, Gary Gensler, the Commodity Futures Trading Commission chairman, told a Senate hearing this week. The goal is to narrow the spread between cash prices and futures, he said. Less index investment may depress prices, analysts said.
"That could have a short-term effect," said Jamey Kohake, a Paragon Investments broker in Silver Lake, Kansas. "We could see heavy liquidation."
Wheat futures for September delivery dropped 15.5 cents, or 2.9 per cent, to $5.1625 a bushel on the Chicago Board of Trade. The drop was the biggest for a most-active contract since June 30.
The grain declined 4.7 per cent this week. Futures are down 34 per cent in the past year, partly on reduced demand for supplies from the U.S., the world's largest exporter.
Larger fund managers "want the open interest to stay high, they want speculation in the market," Kohake said.
The price also dropped on speculation that the winter-wheat crop in Kansas, the largest U.S. producer, will top estimates by the government and analysts. Growers may collect as much as 370 million bushels in the state, said Darrell Holaday, the president of Advanced Market Concepts in Manhattan, Kansas.
On July 10, the U.S. Department of Agriculture forecast 360.8 million bushels. In May, before the winter-crop harvest began, analysts estimated 338 million, on average. Yields in the state were projected at 41 bushels an acre, the USDA said.
"It got better, especially by the Kansas-Colorado border," Kohake said. "I'm hearing about 50- to 80-bushel yields" an acre, he said.
Wheat is the fourth-biggest US crop, valued at $16.6 billion in 2008, behind corn, soybeans and hay, government data show.