March 30, 2007

 

US Wheat Outlook on Friday: 3-5 cents down; following corn, USDA estimates

 

 

U.S. wheat futures are expected to start Friday's day session on the defensive amid pressure from the neighboring corn market and the release of higher-than-expected planting estimates, traders and analysts said.

 

Benchmark Chicago Board of Trade May wheat is called to open 3 to 5 cents lower.

 

In e-cbot trading, CBOT May wheat was up 4 cents at US$4.65, while CBOT July wheat was up 3 1/4 cents at US$4.78 1/4.

 

The U.S. Department of Agriculture pegged prospective corn plantings at 90.454 million acres, above trade estimates of 88.061 million. That is bearish for corn, and wheat will follow to the downside, a CBOT floor trader said.

 

The USDA's estimates for U.S. wheat seedings also were higher than expected. The agency pegged winter wheat area at 44.505 million acres, while a Dow Jones Newswire survey of analysts estimated it at 43.982 million. Last year's seedings were 40.575 million.

 

Seedings for other spring wheat acres came in at 13.808 million, compared to estimates of 13.676 million and 2006 seedings of 14.899 million. Analysts had predicted the USDA would lower its estimate for some U.S. spring wheat acres because of a shift of farmland to corn.

 

Durum wheat intended acreage, meanwhile, was pegged at 1.990 million acres, versus the trade estimate of 1.977 million acres and last year's figure of 1.870 million.

 

All wheat seeded area was 60.303 million, compared to an estimate of 59.750 million and 57.344 million in 2006. At the USDA Agricultural Outlook Forum USDA pegged 2006 all-wheat planted acreage at 60 million.

 

The USDA pegged wheat stocks as of March 1 at 856 million bushels, while the trade estimate was 881 million bushels. In March 2006 stocks were 972 million bushels and last quarter stocks were 1.315 billion bushels.

 

The USDA was expected to drop its estimate for stocks because of slightly higher exports, a slowdown in imports and reports of some feedyards feeding wheat to cattle, analysts said.

 

"Wheat looks to start 3 to 5 cents lower following corn, with acres data neutral and stocks data friendly at the low end of estimates," said Mike Zuzolo, senior analyst with Risk Management Commodities Inc.

 

On the technical charts, bulls and bears are back on a level playing field at CBOT after May wheat prices on Thursday closed near mid-range on short covering, a technical analyst said.

 

The next downside price objective for the bears is closing CBOT May prices below solid support at this week's low of US$4.51 1/4. Bulls' next upside price objective is to close prices above solid resistance at US$4.70.

 

First resistance is seen at US$4.65 and then at Thursday's high of US$4.68 1/2. First support lies at Thursday's low of US$4.55 and then at US$4.51 1/4.

 

May Kansas City Board of Trade wheat prices closed near mid-range Thursday and scored a mildly bullish "outside day" up on the daily bar chart after hitting another fresh six-month low early on, the technical analyst said.

 

"Bears still have the slight near-term technical advantage in hard red winter" wheat futures," he said.

 

The bears' next downside objective is closing KCBT May prices below solid support at the September 2006 low of US$4.56. Bulls' next upside price objective is closing prices above solid chart resistance at US$4.90.

 

First resistance is seen at Thursday's high of US$4.77 and then at US$4.82. First support is seen at Thursday's low of US$4.66 and then at US$4.60.

 

In Argentina, wheat prices were up on the week to Thursday on export demand, the Rosario Grain Exchange said.

 

Spot wheat closed at ARS370 per tonne in Rosario Thursday, up from ARS350 a week earlier. Some 5,000 tonnes of spot wheat were traded. December wheat closed at US$125, up from US$120 a week earlier. Forward wheat sales volume reached 20,000 tonnes.

 

Looking at the weather, there is little change in forecasts for U.S. wheat-growing areas, analysts said. DTN Meteorlogix reported widespread rains and thunderstorms in the U.S. Southern Plains will maintain soil moisture for spring growth of winter wheat. That is bearish for prices, the analysts said.

 

In other news, the Taiwan Flour Millers Association bought 43,000 metric tonnes of U.S. No. 1 wheat from trading house Toepfer at a tender concluded Friday, an association official said. The shipment is expected to arrive in Taiwan between April 30 and May 14.

 

Morocco's state wheat buyer said Friday it bought 94,000 metric tonnes of European Union soft wheat in a tender. The wheat is for shipment before the end of May.

 

India's federal government, meanwhile, will allow "restriction-free" imports of wheat until Dec. 31, 2007, a notification issued by the Directorate General of Foreign Trade said Friday.