March 2, 2006

 

US Wheat Outlook on Thursday: Weaker on bearish export sales

  

 

A weaker trade is expected for U.S. wheat futures Thursday, pressured by bearish weekly export sales figures from the government and expected softness in the rest of the grain futures reade.

 

Benchmark Chicago Board of Trade wheat is called to open steady to one cent weaker.

 

In e-cbot trade, March wheat fell 2 cents to US$2.60 3/4 a bushel while May wheat rose 1/4 cent to US$3.74 1/4.

 

Weekly export sales from the U.S. Department of Agriculture were 159,000 metric tonnes. Trade estimates ranged from 300,000 to 500,000 tonnes. The sales were a marketing-year low at 69% below the previous week and 65% under the prior 4-week average. The biggest buyer was Guatemala at 38,000 tonnes.

 

In its weekly tender, Japan bought 167,000 metric tonnes of wheat, for a May shipment. There were no details on the grades of wheat sought. The U.S. won 85,000 tonnes, while Canada and Australia each garnered 41,000 tonnes.

 

The weekly export sales from USDA are "a sign that high prices are catching up to demand. In a supply bull market you need to ration demand. There's also talk about some rains next week (in the parched central and southern Plains). If that happens we take the supply fears out and if we've rationed demand, we have a problem," said John Kleist of Kleist Ag Consulting.

 

DTN Meteorologix said the central and southern Plains saw another hot day in Oklahoma and north Texas, but temperatures are seen cooling in coming days. There is a chance for light showers from west and north Texas to southern Oklahoma during Thursday and Friday. During the weekend there is a chance for sprinkles and light showers, through central and east areas. Temperatures are seen above normal but not as hot as it has been the past two days.

 

Their six to 10 day outlook calls for temperatures to average near to above normal with precipitation near to above normal through central and east locations, near to below normal west. A technical analyst said CBOT May wheat bulls have some technical momentum, but if prices close under US$3.70, bears could get the upper hand. First resistance is seen at US$3.80 and then at US$3.82 1/2, Wednesday's high. First support lies at US$3.71 1/2, Wednesday's low, and then at US$3.70.

 

Despite May Kansas City wheat ending weaker Wednesday, no serious chart damage occurred. Like CBOT wheat, the analyst said bulls still have some upside momentum, provided the market does not close below US$4.25. First resistance is seen at US$4.39 and then at US$4.42, Wednesday's high. First support is seen at US$4.30, Wednesday's low, and then at US$4.25.

 

CBOT wheat deliveries totaled 212. The major issuer was Man Financial at 116 and the biggest stoppers were ABN Amro stopping 71, Man Financial stopping 57 and USA Trading stopping 45.

 

Minneapolis Grain Exchange deliveries totaled 23. They were issued by UBS Securities, LLC and received by ADM Investor Services.

 

Preliminary open interest for CBOT wheat rose 977 contracts to 391,958 after Wednesday weaker close. "It could suggest new shorts coming in and the longs just not giving up," Kleist said.