March 9 (Bloomberg) -- Wheat prices dropped in Chicago on speculation that the dollar’s rally will erode demand for grain exports from the U.S., the world’s largest shipper.
The greenback gained as much as 1.1 percent today against a basket of six major currencies. The dollar has gained 9.5 percent this year, while the Reuters/Jefferies CRB Index of 19 raw materials, including grains, has dropped 9.2 percent. Wheat futures are down 53 percent in the past year as global production outpaced demand.
“The higher dollar is a negative,” said Clark Neighbors, a commodities broker at Bump Investor Services in Cedar Rapids, Iowa. “In the short term, it’s hard to be enthusiastic about demand.” Bets on Decline
Hedge-fund managers and other large speculators increased their net-short position in Chicago wheat futures in the week ended March 3, Commodity Futures Trading Commission data showed on March 6. Speculative short positions, or bets prices will fall, outnumbered long positions by 18,651 contracts. Net-short positions jumped 59 percent from a week earlier.
Still, demand may rebound in the second half because the price slump has driven down production, Neighbors said.
“Things might look up” in the long term, Neighbors said. “We’re going to be more competitive down the road. But that’s later in 2009 and 2010.” more...
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