February 21, 2006

 

US Wheat Outlook on Tuesday: Steady to 2 cents higher on Iraq, weather

 

 

Wheat futures at the Chicago Board of Trade are expected to begin Tuesday's open auction trading flat to 2 cents higher, as news that Iraq purchased a combination of U.S., Canadian and European wheats.

 

Talk of possible winterkill in the hard red winter wheat growing area also is expected to lend support, floor sources said.

 

In overnight e-CBOT trading, March wheat gained 2 1/2 cents to US$3.70 1/2 per bushel, May gained 1 3/4 cents to US$3.81 1/4, and July rose 1 1/4 cents to US$3.91.

 

Overnight at the KCBT, March wheat ended up 4 cents at US$4.39, and May was up 4 3/4 cents at US$4.44 1/4.

 

Wheat should see higher prices on the opening, a commission house analyst said. There is talk about winterkill in parts of the hard red wheat belt due to the cold temperatures. However, any effects of the cold on the crop won't be known until later in the season, he said.

 

Additional support could be garnered from news that Iraq had purchased U.S., Canadian, and EU wheat over the weekend after delaying its tender several times. According to CBOT floor sources, Iraq was thought to have purchased 450,000 metric tonnes of U.S. Wheat, 400,000 tonnes of Canadian wheat and 150,000 metric tonnes of EU wheat.

 

The amount the U.S. sold, if true, is a little negative, a floor analyst said. Late last week, the talk was 1 million tonnes U.S. wheat and 500,000 metric tonnes of Canadian wheat, so it might be construed as a little negative, he said. However the market has really focused on the cold weather and the dryness in the hard red wheat areas and that should continue Tuesday, he added.

 

Temperatures reached as low as minus 5 to minus 15 F in northern Colorado and southern Nebraska and minus 5 to plus 3 F in western and northern Kansas over the weekend, DTN Meteorlogix weather said.

 

Mainly dry conditions are expected over the next several days in the U.S. Central Plains with only a chance for sprinkles or light showers in the extreme south Wednesday or Thursday with temperatures average to above normal, Meteorlogix added.

 

On technical charts, CBOT May hit a fresh 7-month high on Friday. The next upside objective is closing prices above the July 2005 high of US$3.82, with a close below last week's low of US$3.54 1/2 providing the bears with some fresh downside technical momentum, a technical analyst said. First resistance is seen at US$3.80, Friday's high and then at US$3.82. First support lies at US$3.75 and then at US$3.70.

 

For May KCBT, after hitting a fresh contract high, the next upside objective is to close prices above the US$4.50 resistance level. First resistance is pegged at US$4.40, the contract high and then at US$4.45. First support is seen at Friday's low of US$4.31 and then at US$4.25.

 

Cash wheat basis bids were mostly unchanged Tuesday morning. Soft red wheat basis bids were unchanged to lower with Cincinnati down 2 cents at 7 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., unchanged at 26 cents under MGE March futures.

 

In other wheat news, India has received up to eight bids from firms looking to supply the country with up to 500,000 metric tonnes of wheat, according to a senior official with India's State Trading Corp. The STC called for bids early this month to import 500,000 tonnes of wheat. "A final decision will be taken on the bids shortly," the official said.

 

Japan's Ministry of Agriculture, Forestry and Fisheries will seek 125,000 metric tonnes of milling wheat in a buy tender on Thursday, a Tokyo based trader said Tuesday. MAFF will buy 60,000 metric tonnes of U.S. wheat from the total.