January 30, 2009

 

US Wheat Outlook on Friday: Seen mixed, following demand from Egypt

 

 

U.S. wheat futures are expected to start mixed Friday, with a sale of wheat to Egypt seen lending support after prices slipped a bit overnight.

 

In overnight electronic trading, CBOT March wheat stumbled 1 1/2 cents to US$5.76 1/2 per bushel.

 

Egypt's state-owned General Authority for Supply Commodities said it was buying 180,000 tonnes of wheat in a tender, including 60,000 tonnes of U.S. soft red winter wheat and 120,000 tonnes of French wheat. GASC bought U.S. SRW wheat for US$194.64 per tonne, free on board.

 

The sale to Egypt is "supportive" because it shows U.S. wheat is "in the ballpark" to compete for business on the world export market, a CBOT floor trader said. U.S. wheat previously was being undercut by prices from Russia. It was interesting GASC did not buy any Russian wheat in the latest tender as there is talk the Black Sea region may be running out of milling quality wheat, a trader said.

 

Expectations that the U.S. may pick up some export business to Brazil also remain supportive, a trader said. Brazil normally imports most of its wheat from Argentina, but Argentina's crop had been hurt by a drought.

 

The markets will continue to keep an eye on activity in neighboring CBOT corn and soybeans, which are being influenced by weather forecasts in Argentina. Corn was slightly lower overnight, and soybeans were slightly higher.

 

The main weather concern for the U.S. hard red winter wheat crop is the dryness over southwest Kansas, Oklahoma and Texas, DTN Meteorlogix said. There is little chance for improvement in these locations during the next seven days, the private weather firm said.

 

In soft red winter wheat areas of the U.S. Midwest, no damaging cold is expected for wheat, Meteorlogix said. Warmer temperatures in Ukraine and southern Russia will favor dormant winter crops but melt some of the protective snow cover, the firm said.

 

In other news, India's wheat area during the Oct. 1-Jan.30 period stood at 27.5 million hectares, slightly down from 27.4 million hectares a year ago, the government said. In India, sowing of wheat starts in early November and the crop is harvested in March.

 

India's recent decision to raise wheat procurement prices has dashed ideas that it will return to the export market. With domestic prices already above international levels, a further hike in prices during the next harvest will make it impossible for exporters to procure wheat at competitive prices, traders and analysts said.

 

The next downside price objective for the bears is pushing and closing CBOT March wheat below solid technical support at the January low of US$5.48 1/4, a technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at this week's high of US$6.11, he said.

 

First resistance is seen at US$5.90 and then at US$6.01. First support lies at Thursday's low of US$5.73 and then at US$5.60.