March 28, 2006

 

US Wheat Outlook on Tuesady: Steady to firm opening expected

 

 

U.S. wheat futures are forecast to begin open auction trading steady to firm Tuesday, with the market expected to continue its recent choppy activity, sources said.

 

In overnight activity, CBOT May wheat ended unchanged at $3.39 3/4 per bushel, and July also ended unchanged at $3.51 3/4.

 

Overnight at the KCBT, May rose 2 3/4 cents to $4.00 1/4 while July increased 1 1/2 cent to $4.04.

 

The market should drift around these levels ahead of Friday's reports, waiting for some direction, a floor analyst said.

 

On Friday, the US Department of Agriculture is scheduled to release the Prospective Plantings and Quarterly Grain Stocks reports at 7:30 a.m. CST. The average winter wheat acreage estimate of 9 analysts polled by Dow Jones is 41.405 million acres compared to the 2005 figure of 40.433 million acres.

 

The average of 7 analysts' estimates of quarterly wheat stocks was 973 million bushels versus the 2005 March 1 stocks estimate of 984 million bushels.

 

News of increased US wheat sales to Iraq should be offset by the improved crop conditions, a commission house analyst said. At this point the market doesn't know if the increased wheat sales are for old crop or new crop wheat. If it's new crop, that would be considered negative, he added.

 

Iraq purchased 500,000 metric tonnes of Australian wheat at $190 per tonne, the head of the Iraqi Grain Board said Tuesday. The purchase was made from a non-AWB Ltd. supplier.

 

Khalil Assi, the head of the board also announced that Iraq had increased its US wheat purchases from the previously announced 150,000 metric tonnes to 450,000 tonnes. The wheat was purchased from the US at $190 and $189 per tonne.

 

The new purchases from Australia and the US have brought Iraq's total wheat purchases in 2006 to 1.450 million metric tonnes, Assi said. In addition, Iraq is still willing to buy up to 150,000 tonnes of German wheat.

 

Late Monday, several states released their weekly wheat condition reports. In Kansas 26% of the crop is now rated in good-to-excellent condition, up 2 percentage points from last week. 29% of the crop was rated in poor to very poor condition compared to 38% the previous week.

 

In Oklahoma 6% of the crop is rated good-to-excellent, no change from the previous week. 65% of the crop is rated in poor-to-very poor condition, versus 70% last week.

 

In Texas, 7% of the crop is rated in good-to-excellent condition, up 2 percentage points from last week. 78% of the crop is rated poor-to-very poor versus 80% last week.

 

In the U.S. Central Plains there is a chance for showers to develop Wednesday before ending on Thursday, DTN Meteorlogix weather said. Rainfall from these showers should average .25-1.00 inch through eastern locations but only a trace to .35 inch in the west. Temperatures will average above normal Wednesday and near to above normal Thursday, DTN Meteorlogix weather said.

 

In the eastern U.S. Midwest soft red wheat growing region, showers may linger on Wednesday, before showers return to the region late Thursday with amounts .25-1.00 and locally heavier, before dry conditions return on Saturday, DTN Meteorlogix weather said.

 

On technical charts, the next major downside objective remains the January low of $3.32 1/2 for CBOT May wheat, and it will take a close above $3.65 to provide bulls with some fresh upside technical momentum, a market technician said. He sees first resistance in CBOT May at $3.45, and then at $3.50. First support is seen at $3.39 and then at $3.35.

 

For May KCBT, the next major downside objective is closing prices below solid technical support at $3.85, the analyst said. First resistance is seen at $4.04, Monday's high and then at $4.08. First support is seen at $3.97 1/2, and then at $3.95.

 

Cash wheat basis bids were mixed Tuesday morning. Soft red wheat basis bids were unchanged to higher with Cincinnati unchanged at 15 cents under the May future.

 

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

 

Hard spring wheat basis bids were also mixed with Minot, N.D. three cents higher at 32 cents under the May future.