February 7, 2006

 

US Wheat Outlook on Tuesday: 1-2 Cents higher on dryness concerns

 

 

Wheat futures at the Chicago Board of Trade are expected to open 1-2 cents higher Tuesday, following overnight activity, and on continuing concerns over dry conditions in the hard red winter wheat belt, sources said.

 

In overnight e-CBOT trading, March wheat rose 1 1/4 cents to $3.56 1/4 per bushel, May wheat gained 1 3/4 cents to $3.67 1/2, and July ended up 1 1/4 cents to $3.76 3/4.

 

Continued concerns regarding the dry conditions in the U.S. South-central Plains, and worries over conditions in parts of the European Union and the Ukraine should support wheat futures today, said John Kleist, of Kleist Ag Consulting of Arlington Heights, Ill.

 

"One wave lifts all ships," Kleist said, and concerns about the hard red crop should support soft red wheat in Chicago.

 

In addition, the U.S. Department of Agriculture is scheduled to release the latest supply and demand report Thursday and it should show a decline in the overall wheat carryout, he said.

 

Continued dry conditions are expected through the weekend in the Central and Southern Plains, DTN Meteorlogix weather said. Temperatures are expected to average near to above normal west, near to below normal east, with precipitation near to below normal, Meteorlogix said.

 

On technical charts, the bulls still have near-term momentum, but the key question is how much more fund money will come into the wheat market, a technical analyst said. The next upside objective for CBOT March is the September 2005 high of $3.65, with a close below $3.45 providing the bears with fresh downside technical momentum, he said. First resistance is pegged at $3.60, Monday's high and then at $3.61 1/2, last week's high. First support is seen at $3.53, Monday's low and then at $3.50.

 

For March KCBT wheat Monday's contract high of $4.32 is now strong overhead resistance with first resistance seen at $4.20 and then at $4.25, the analyst said. Support is pegged at Monday's low of $4.11 and then at $4.05.

 

Cash wheat basis bids were mixed Tuesday morning. Soft red wheat basis bids were unchanged to lower with Evansville, Ind. unchanged at 5 cents over CBOT March.

 

Hard red winter wheat basis bids were mostly unchanged with Manhattan, Kansas unchanged at 13 cents under KCBT March wheat.

 

Spring wheat basis bids were mostly unchanged as well with Minot, N.D. unchanged at 24 cents under MGE March futures.

 

In other news, the Texas weekly crop conditions report noted little change in winter wheat conditions, with 89% of the crop in poor to very poor conditions thought Sunday Feb. 5.

 

In Kansas, 52% of the winter wheat crop was reported in good-to-excellent condition through Feb. 5.

 

In global wheat news, Japan's Ministry of Agriculture, Forestry and Fisheries will tender for 116,000 metric tonnes of milling wheat in a tender to be held on Thursday, a Tokyo-based trader said.

 

Indian wheat production in 2005-06 is likely to reach 73.1 million metric tonnes versus 72 million, the Indian government reported Tuesday.

 

Through Feb. 3 the Ukrainian government purchased 3.561 million metric tonnes of grain harvested from domestic producers the Agriculture Ministry said. The government expects to purchase an additional 1.5 million this year, the ministry said.

 

Wheat futures open interest at the Chicago Board of Trade, rose by 1,926 contracts on Monday to 369,999 contracts, according to preliminary data released by the exchange, continuing its recent string of open interest increases.