January 12, 2007

 

US Wheat Outlook on Friday: 8-10 cents up On bullish USDA corn estimates

 

 

U.S. wheat futures are expected to start Friday's day session firmer on spillover support from bullish new government estimates for U.S. corn carryout, analysts said.

 

Benchmark Chicago Board of Trade March wheat is called to open 8 to 10 cents per bushel firmer.

 

In e-cbot overnight trade, CBOT March wheat was up 3 1/2 cents at US$4.60.

 

Wheat futures will likely move higher early on borrowed strength from CBOT corn futures, analysts said. The U.S. Department of Agriculture estimated U.S. corn carryout at 752 million bushels, sharply below the average analyst expectation of 893 million bushels.

 

Corn is considered the leader of wheat, sources noted.

 

The USDA report was overall "pretty neutral" for wheat, a CBOT floor trader said.

 

It estimated U.S. winter wheat seedings at 44.089 million acres, slightly below the average analyst expectation of 44.2 million acres. Specifically, hard red winter wheat seedings and white winter wheat seedings were below analyst's expectations, while soft red winter wheat seedings were modestly above expectations.

 

The higher SRW wheat number was a surprise because wet weather was thought to have discouraged planting of the crop, a source noted.

 

The USDA's U.S wheat carryout estimate, meanwhile, came in above analysts' expectations at 472 million bushels. The USDA pegged quarterly wheat grain stocks at 1.315 billion bushels, matching analysts' expectations.

 

The USDA increased its estimate for world wheat carryover from 120.7 million metric tonnes to 121.8 million. World production, however, was little changed.

 

"Today, it's all about following corn," the CBOT floor trader said.

 

The next downside price objective for the bears is closing CBOT March wheat prices below solid support at this week's low of US$4.47 1/2, a technical analyst said. The bulls' next upside price objective is to close prices above solid resistance at US$4.70.

 

First resistance is seen at Thursday's high of US$4.63 1/4 and then at US$4.70. First support lies at Thursday's low of US$4.53 1/2 and then at US$4.47 1/2.

 

At the Kansas City Board of Trade, bears still have downside technical momentum, the technical analyst said.

 

The bears' next downside objective is closing KCBT March wheat prices below solid support at the August low of US$4.62. The bulls' next upside price objective is closing prices above psychological resistance at US$5.00.

 

First resistance is seen at Thursday's high of US$4.84 1/2 and then at US$4.90. First support is seen at Thursday's low of US$4.76 1/2 and then at US$4.74, which was the bottom of Thursday's downside price gap.

 

Looking at the weather, a significant precipitation event that could include snow, ice and rain is expected over the weekend in the U.S. Southern Plains, the DTN Meteorlogix weather firm reported. Melted precipitation, however, will be much less than in the past two storms with amounts of 1/10 inch to 1/2 inch over western areas and 1/4 inch to 1 inch in the east, the firm noted.

 

Soil moisture will continue to improve for winter wheat, and temperatures will not be cold enough to cause any damage to the crop as any subzero cold would be under protective snow cover, Meteorlogix added.

 

In the eastern Midwest and Delta, the soft red winter wheat belt should see a heavy rain event early next week, possibly ending as some snow or ice as colder weather moves in, Meteorlogix reported. No damaging cold is indicated, the firm noted.

 

In other news, the USDA announced Friday private export sales of 100,000 metric tonnes of U.S. hard red winter wheat for delivery to Iraq in the 2006-07 marketing year. The wheat marketing year began June 1.

 

Elsewhere, India's wheat plantings between Oct. 1 and Jan. 12 are estimated at a record 27.94 million hectares, up from 26.17 million hectares in the year-earlier period, according to the latest government data.

 

Plantings of wheat so far have already surpassed last year's total of 26.6 million hectares, and an industry executive said the early sown crop in the western province of Gujarat is already being harvested in very small daily volumes of 40 to 50 tonnes.

 

In Hungary, meanwhile, the size of the wheat crop fell to 4.4 million tonnes in 2006, down 13.9% from a year earlier as the area for wheat fell 4.7% to 1.1 million hectares, according to preliminary figures released by the country's central statistics office.