February 15, 2006

 

US Wheat Outlook on Wednesday: Flat to down 1 cent, waiting on fresh inputs

 

 

Wheat futures at the Chicago Board of Trade are forecast to begin trading flat to 1 cent lower Wednesday as the lack of inputs and the continued absence of a decision regarding Iraq's often delayed tender for optional origin wheat has the market looking for fresh news, sources said.

 

In overnight e-CBOT trading, March wheat slipped 3/4 cent to US$3.46 1/2 per bushel, May wheat declined 1/2 cent to US$3.58, and July edged 1 1/2 cents lower to US$3.67 1/2.

 

Overnight at the KCBT, March wheat fell 3/4 cent to US$4.12 1/4 and May lost 1 3/4 cents to US$4.16 1/4.

 

The market should see both sides of Tuesday's settlement prices, a commission house analyst said. There wasn't much news out overnight and the outside markets are mixed, with no direction expected from them. The situation surrounding the Iraq tender remains unresolved as well, with reports that Iraq has asked the EU to provide quotes for both hard red and soft red wheat, he added.

 

Iraq has delayed the opening of its tender for up to 1 million tonnes of optional origin wheat several times, and has suspended dealing with Australia's monopoly wheat exporter AWB amid an inquiry into its dealings with Iraq's former regime under Saddam Hussein. Australia was a major supplier of wheat to Iraq under his rule.

 

On technical charts, bulls still have the near-term advantage, a technical analyst said. The upside price objective for May CBOT wheat remains last week's high of US$3.76, with a close below US$3.50 providing the bears with fresh downside momentum, the analyst said. He sees first resistance at US$3.60 1/2, Tuesday's high and then at US$3.67. First support is pegged at US$3.54 1/2, Tuesday's low and then at US$3.50.

 

For May KCBT, it will take a close beneath Tuesday's low of US$4.10 to provide the bears with fresh downside momentum, the analyst said. He sees first resistance at US$4.20 and then at US$4.25. First support is seen at Tuesday's low of US$4.10 and then at US$4.04.

 

There is a chance for some light precipitation over the next five days in the central and Southern Plains, DTN Meteorlogix weather said. Temperatures are expected average above normal the first several days of the period but turn below to much below normal in the latter half of the period, Meteorlogix said.

 

Cash wheat basis bids were at unchanged levels Wednesday morning. Soft red wheat basis bids were unchanged to higher with Evansville, Ind., unchanged at 4 cents under CBOT March.

 

Hard red winter wheat basis bids were unchanged with Manhattan, Kansas unchanged at 15 cents under KCBT March wheat.

 

Spring wheat basis bids were also unchanged with Minot, N.D., unchanged at 30 cents under MGE March futures.

 

In global wheat news, Australia will send a delegation to Iraq to discuss its possible participation in any wheat tenders by Iraq. The Iraqi Grain board recently suspended dealing with the AWB, the monopoly Australian wheat exporter on reports that the AWB provided kickbacks to the former regime of Saddam Hussein.

 

South Korea's CJ Corp. and Donagh Flour Mills Ltd. bought 20,000 metric tonnes of U.S. No. 1 wheat from trading house Columbia Grains in a tender concluded Wednesday, a trader in Seoul said.

 

Ecuador's wheat production is expected to decrease, with imports climbing to 460,000 metric tonnes in 2006, the U.S. Department of Agriculture's Foreign Agricultural Service, FAS reported late Tuesday.

 

Bangladesh imports of wheat and rice are expected to climb to 2.8 million metric tones in 2006-07 (800,000 and 2 million tonnes of rice) from the previous year, the FAS said.