March 22, 2006

 

US Wheat Outlook on Wednesday: Up on follow through, firm e-CBOT

 

 

U.S. wheat futures are forecast to begin Wednesday's session 1-2 cents higher as a firm tone overnight and follow through from Tuesday's close are expected to support prices, floor sources said.

 

In overnight activity, May wheat rose 2 cents to $3.54 1/2 per bushel, and July gained 1 1/4 cents to $3.66.

 

Overnight at the KCBT, May ended up 2 1/2 cents to $4.19 1/2 while July rose 2 cents to $4.22 1/4.

 

Wheat has come off its recent levels pretty hard and the corrective bounce that began Tuesday could continue, a floor analyst said.

 

In addition, wheat could draw some support from corn futures, but beyond that there is not much fresh news, he added. Corn rallied Tuesday on heavy fund buying.

 

Although recent moisture has helped the wheat crop in the U.S. Central Plains, additional moisture is needed to bring the crop up to its full potential, as one rain does not make a crop, a CBOT floor trader.

 

There is a chance for light precipitation in the U.S. Central Plains over the next several days with amounts of .10-.25 inch in southwest Kansas into the Texas Panhandle and western Oklahoma Wednesday. Mainly dry conditions are forecast through Saturday with temperatures averaging well below normal.

 

In the eastern U.S. Midwest soft red winter wheat growing region, mostly dry conditions are forecast over the next several days with temperatures averaging below to well below normal.

 

On technical charts, a close below this week's low of $3.47 1/2 in May would provide the bears with better downside momentum, a technical analyst said. He sets first resistance in CBOT May at $3.54 1/2, and then at $3.60. First support is seen at $3.47 1/2 and then at $3.45.

 

For May KCBT, bears still have some downside momentum, the analyst said. First resistance is pegged at $4.19, and then at $4.25. First support is seen at $4.08 1/2, this week's low and then at $4.05.

 

Cash wheat basis bids were unchanged to higher Wednesday morning. Soft red wheat basis bids were unchanged to higher with Cincinnati 8 cents higher at 18 cents under the May future.

 

Hard red wheat basis bids were mostly unchanged with Hutchinson, Kan. unchanged at 11 cents under the May.

 

Hard spring wheat basis bids were mostly unchanged with Minot, N.D. 1 cent higher at 38 cents under the May future.

 

In other wheat news, three South Korean flour mills jointly bought 9,200 metric tonnes of U.S. origin wheat in a tender concluded Wednesday, a trader based in Seoul said.

 

Wheat Australia Ltd., the company set up to supply Iraq with Australian wheat after Iraq declined to deal with Australian monopoly exporter AWB Ltd., has submitted a bid to supply Iraq with up to 500,000 metric tonnes of wheat.

 

Australian wheat production for 2006-07 is forecast at 24.0 million metric tonnes 1.1 million tonnes below the 2005-06 crop, according to a U.S. Department of Agriculture report posted on the Foreign Agricultural Services web site.