January 5, 2006

US Wheat Outlook on Thursday: Flat-firm, led by KCBT on Iraq purchase

U.S. wheat futures were called to open flat to up 2 cents Thursday, led by gains in Kansas City Board of Trade hard red winter wheat on news that Iraq bought 1 million tonnes of U.S. hard wheat for delivery from the end of January, brokers said.

The report offset bearish overnight export news that Egypt bought 320,000 tonnes of Australian and Russian wheat and no U.S. grain, they noted.

In terms of the Iraqi deal, an official with the Iraqi Grain Board said the government had signed a contract with U.S. Cargill Inc. (CRG.XX) to supply 800,000 metric tonnes of U.S. hard wheat. The remaining 200,000 tonnes were bought from another U.S. firm whom he didn't name.

Iraq also signed two contracts to purchase 500,000 tonnes of rice from the U.S. and Thailand.

In the overnight e-CBOT session, most-active March wheat at the Chicago Board of Trade closed down 2 cents at US$3.44 1/4.

First resistance for CBOT March was seen at US$3.47 - last week's high - and then at US$3.50. First support lies at US$3.41 1/2 and then at US$3.40.

The overnight e-CBOT losses followed this week's fund-led rally to a match of contract highs in KCBT and Minneapolis Grain Exchange March wheat.

Cash U.S. hard red winter wheat basis bids were steady Thursday; soft red winter wheat basis bids were steady to mixed, with a 5-cent gain in Memphis, Tenn., and a 2-cent loss in Toledo; and spring wheat basis bids were mixed, with a 10-cent loss in the Minneapolis rail bid, grain merchandisers said.

Traders continued to eye reports of poor crop conditions in the southern Great Plains due to lingering droughty weather. Forecasts called for more hot, dry weather through Monday.