February 17, 2006

 

US Wheat Outlook on Friday: Flat to 1 cent higher on follow through

  

 

Wheat futures at the Chicago Board of Trade are expected to start open outcry trading flat to 1 cent higher Friday as Thursday's firm close, concerns about frigid weather in the Plains and stronger outside markets are expected to supply support, floor sources said.

 

In overnight e-CBOT trading, March wheat rose 1/2 cent to US$3.59 1/2 per bushel, May gained 1/2 cent to US$3.70 1/2, and July also rose 1/2 cent higher to US$3.80 1/4.

 

Overnight at the KCBT, March wheat ended up 1/2 cent at US$4.26, and May was unchanged at US$4.29 1/2.

 

The market should garner some support from Thursday's firm close and the weekend weather, a floor analyst said. Colder temperatures present the possibility of winterkill in parts of the hard red wheat belt, but that won't be determined until the harvest begins, the analyst said.

 

The chance for light precipitation and much colder weather in the Central and Southern Plains is forecast over the next several days, DTN Meteorlogix weather said. Temperatures will average below or much below normal. Readings may drop to 2 to 10 below zero in Nebraska, northwest Kansas and northeast Colorado. Temperature readings of minus 2 to plus 5 are possible in southeast Colorado, central and southwest Kansas in this period, Meteorlogix said.

 

In addition to the the weather concerns, outside markets are higher this morning and that could help support grain futures Friday, a commission house analyst said.

 

The wheat market also continues to wait for any news regarding the Iraqi Grain board and its oft-delayed tender for optional origin wheat. An Iraqi official said on Thursday that any decision to purchase wheat was pushed back to this coming Sunday.

 

The U.S. Department of Agriculture forecast 2006-07 U.S. wheat plantings would increase 0.8 million acres from 2005 seedings to total 58 million acres.

 

U.S. 2006-07 wheat yields are anticipated to rise to 42.6 bushels per acre, above the actual 2005 yields of 42 bushels per acre, the government said at its Agricultural Outlook Forum.

 

Harvested U.S. 2006-07 wheat acreage was put at 48.7 million acres, with U.S. wheat production at 2.075 billion bushels, the USDA said. Final U.S. 2005-06 wheat production was 2.105 billion bushels.

 

On technical charts, the bulls have regained some solid technical momentum, a technical analyst said. The next upside price objective for CBOT wheat is closing prices above last week's high of US$3.76; with a close below this week's low of US$3.54 1/2 would provide the bears with some fresh downside technical momentum. He pegs first resistance at US$3.70 1/2, Thursday's high and then at US$3.76. First support is pegged at US$3.63, Thursday's low and then at US$3.60.

 

For May KCBT, the next upside objective is to close prices above the contract high of US$4.39. First resistance is pegged at US$4.30 and then at US$4.35. First support is seen at Thursday's low of US$4.21 1/2 and then at US$4.17.

 

Cash wheat basis bids were unchanged to higher Friday morning. Soft red wheat basis bids were unchanged to higher with Cincinnati unchanged 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 unchanged to higher with Minot, N.D., up 4 cents at 26 cents under MGE March futures.

 

In other wheat news, four South Korean millers bought a total of 22,300 metric tonnes of U.S. No. 1 wheat from trading house Itochu in a tender concluded Friday, an official with one of the milling firms said.