Feburary 1, 2006

 

US Wheat Outlook on Wednesday: Down 2-4 cents on follow-through sales, e-CBOT

 

 

U.S. wheat futures were called to open down 2-4 cents Wednesday on follow-through sales after a late speculative-led break during Tuesday's active session and weak overnight trade, brokers said.

 

They awaited any news from Iraq about the opening of bids for a tender for 1 million metric tonnes of optional hard wheat that closed Saturday.

 

"If it (the sale) comes out to the U.S., it's old news; if it comes out to Australia, it would be negative," said John Kleist, of Kleist Ag Consulting, on Wednesday. "That's how it's going to be featured here."

 

Overnight U.S. wheat export sales were quiet, while the dollar was higher early Wednesday, a bearish factor for U.S. grain export sales.

 

Statistics Canada reported early Wednesday that December 2005 wheat stocks totaled 24.14 million metric tonnes, a little less than traders' estimates but a negative number overall, Kleist added.

 

Moreover, calls for a weak open Wednesday in Chicago Board of Trade soybean and corn futures were seen weighing on CBOT wheat.

 

In the overnight e-CBOT session, most-active March wheat at the Chicago Board of Trade closed down 4 cents at US$3.39 1/4.

 

A close below US$3.35 in CBOT March would provide the bears with some fresh downside technical momentum, a technical trader said. First resistance was seen at US$3.47 3/4- Tuesday's high - and then at US$3.50. First support was put at US$3.38 1/2 - Tuesday's low - and then at US$3.35.

 

The CBOT on Wednesday said preliminary open interest levels rose 7,495 contracts during Tuesday's session, which would mean a new open interest record in CBOT wheat.

 

Cash U.S. hard red winter wheat basis bids were mostly steady Wednesday; soft red winter wheat basis bids were mixed; and spring wheat basis bids were steady, grain merchandisers said.

 

Traders continued to eye forecasts for the drought-stricken southern tier of the U.S. hard red winter wheat belt. Meteorlogix weather service forecast dry weather through Sunday, with temperatures rising to above-normal in the western region at the end of the weekend.

 

In global wheat news, India's Prime Minister said the country is heading toward record wheat production this year and vowed the government would ensure prices of foodgrains remained under reasonable control. The previous record crop was 76.4 million tonnes set in 2000.

 

India's wheat stocks fell to about 6.3 million metric tonnes, as of Jan. 1, from 8.9 million tonnes last year, sparking speculation both that imports would be needed before the springtime harvest. Government officials have denied that need for imports.

 

Meanwhile, the treasurer of AWB, a listed company that was for many years known as the Australian Wheat Board said Wednesday that he favors a relaxation of the monopoly while Agriculture Minister Peter McGauran also acknowledged it might be time to change export procedures. The news follows bribery allegations raised at a government inquiry into Iraqi sales during Saddam Hussein's regime.

 

At stake is AUS$4.5 billion (USUS$3.4 billion) in annual wheat exports, which along with U.S. grains are a major supplier to global markets.