February 6, 2006

 

US Wheat Outlook on Monday: Steady; looking to funds for direction

 

 

U.S. wheat futures are expected to begin open auction trading steady Monday, as the market digests recent gains based on weather concerns in the U.S. central plains and the influx of money entering futures from managed money concerns, sources said.

 

"Money flow is the key," a commission house analyst said. The fundamentals have been over taken in Chicago by the flow of money into commodities, he said.

 

There continues to be nothing to support Chicago wheat based on the fundamentals, he said, but hard red wheat futures were higher overnight in Kansas City. The technical charts, however, remain strong, and the weather situation is the hard red wheat belt remains a concern, he added.

 

In overnight e-CBOT trading, March wheat slipped 1/2 cent to $3.56 per bushel, May wheat declined 3/4 cent to $3.67, and July fell 1 3/4 cents to $3.76 1/4.

 

Dry weather is expected in the central-southern plains over the next several days, DTN Meteorlogix weather said. Mainly dry weather is forecast in the region over the next several days with only a little very light precipitation expected. Temperatures are expected to average above normal to normal Monday and Tuesday and near to above normal Wednesday, Meteorlogix said.

 

The Commodity Futures Trading Commission reported Friday that large non-commercial speculators were net short 6,163 wheat futures and options on futures contracts at the CBOT as of Jan. 31.

 

Meanwhile, large non-commercial traders were net long 50,114 wheat futures and options on futures contracts traded at the KCBT and were net long 11,256 wheat futures and options on futures contracts at the Minneapolis Grain Exchange, as of Jan. 31. the CFTC reported Friday.

 

On technical charts, futures gapped higher on the daily bar charts and reached 3 1/2 month highs, a technical analyst said. Bulls have good near-term technical momentum with their next upside price target the September high of $3.65, although a close below $3.45 would provide the bears with some fresh downside technical momentum, he said. He pegs first resistance at $3.61 1/2, Friday's high and then at $3.65. First support is seen at Friday's low of $3.50 and then at $3.48.

 

Wheat futures open interest at the Chicago Board of Trade, rose by 14,248 contracts on Friday to 368,073 contracts, according to preliminary data released by the exchange, continuing its recent string of open interest increases.

 

In other wheat news, Iraq has postponed a meeting for the second time to decide on the expected purchase of up to 1 million tonnes of wheat, with the meeting now set for Wednesday, an Iraqi official said.

 

South Korea's Major Feedmill Group purchased 55,000 metric tonnes of Canadian-origin wheat from Toepher, a trader in Seoul said Monday.

 

India has planted 26.5 million hectares of wheat in the Nov. 1-Feb. 6 period, compared to 26.3 million hectares in the year-earlier period, the Ministry of Agriculture said Monday. The Indian government has forecast wheat production of 75.5 million metric tonnes in the current crop year to June.

 

Against a goal of producing 79.5 million metric tonnes in 2004-05, the country produced only 72 million tonnes with the Indian government recently announcing plans to import 500,000 metric tonnes of wheat by April.

 

Premiums of wheat delivered to Asia may rise in the week ahead as crop woes in the U.S. and Black sea regions are likely keep fueling the rise in wheat futures, analysts said.

 

The U.S. Department of Agriculture is scheduled to release the weekly export inspections report at 10:00 a.m. CST.