February 16, 2006

 

US Wheat Outlook on Thursday: Steady to up 2 cents on follow through

  

 

Wheat futures at the Chicago Board of Trade are expected to start open outcry trading steady to 2 cents higher Thursday as follow through from Wednesday's firm close is expected to provide support, floor sources said.

 

In overnight e-CBOT trading, March wheat rose 1 1/4 cents to US$3.53 1/4 per bushel, May gained 1 1/2 cents to US$3.64 3/4, and July edged 1/4 cent higher to US$3.74 1/4.

 

Overnight at the KCBT, March wheat ended unchanged at US$4.16 1/2, and May gained 2 1/4 cents to US$4.22.

 

Follow through buying from Wednesday and better than expected export sales should provide support to the market, a commission house analyst said.

 

The U.S. Department of Agriculture reported Thursday morning that weekly export sales were 593,600 metric tonnes for the week ended Feb. 9, above the 300,000-500,000 tonnes expected by analysts.

 

Some support might come from concerns over the cold weather forecast for portions of the hard red winter wheat area in the Central Plains, sources said.

 

Temperatures over the weekend will fall as low as zero Fahrenheit in parts of Kansas with the chance of light widespread precipitation, up to .25 inch melted over the next several days, DTN Meteorlogix weather said.

 

Traders were mixed about the latest news regarding the oft-delayed Iraqi wheat tender. One trader noted that this bodes well for possible U.S. wheat sales to Iraq, but another noted the continued delays weren't positive.

 

Iraq has delayed until Sunday any decision to purchase wheat, a senior official with the Iraqi Grain board said. In addition, the board said it wouldn't buy wheat from AWB Ltd. (AWB.AU), Australia's monopoly wheat exporter until an inquiry into alleged kickbacks under the oil-for-food deal is finished.

 

The official said the board has cancelled plans to buy from U.S. wheat suppliers due to high prices.

 

There have been reports that the grain board is looking at suppliers from Canada, and the EU and Australia, excluding the AWB.

 

Iraq is reportedly interested in purchasing up to 1 million metric tonnes of optional-origin wheat.

 

On technical charts, no serious chart damage has occurred this week and the bulls regained some technical momentum Wednesday, a technical analyst said. He sees first resistance at US$3.64 3/4, Wednesday's high and then at US$3.67. First support is pegged at US$3.60, Tuesday's low and then at US$3.55.

 

For May KCBT, the analyst sees first resistance at US$4.22 and then at US$4.25. First support is seen at Wednesday's low of US$4.13 1/2 and then at US$4.10.

 

Cash wheat basis bids were unchanged to mixed Thursday morning. Soft red wheat basis bids were unchanged to higher with Cincinnati 3 cents higher at 5 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, Japan's Ministry of Agriculture, Forestry and Fisheries MAFF bought 100,000 metric tonnes of milling wheat Thursday a Tokyo based trader said. MFF bought 60,000 tonnes of U.S. wheat and 40,000 tonnes of Australian wheat.

 

Australia's Graincorp Ltd. (GNC.AU), a marketing, milling and logistics concern said Thursday it is ready and able to export bulk wheat. This follows the decision by the Iraqi Grain board to suspend dealings with the Australian Wheat Board.

 

With a 20 million metric tonne decline in projected 2006-07 wheat output there is a threat for world wheat stocks to decline to an extremely low level, private grain analytical firm Strategie Grains said Thursday. However, high levels of export availability in Canada, the E.U. and Australia and the risk of a decline in world consumption could help alleviate the situation, the firm said.

 

According to the USDA's Foreign Agricultural Service FAS web site, Global wheat production this year is the second highest in history, behind last year's level. However, production is being outstripped by record consumption levels, the FAS reported. Stocks in major exporting countries are projected to remain at fairly high levels, the FAS said.