April 13, 2006

 

US Wheat Outlook on Thursday: Flat-down 1 cent on overnight, export sales

 

 

U.S. wheat futures are expected to open steady to 1 cent lower Thursday on a flat-to-weak overnight session and on weekly export sales that were about as expected, sources said.

 

In overnight e-cbot trade, May wheat was unchanged at $3.60 1/2 and July was down 3/4 cent at $3.73 3/4.

 

Export sales for the week ended April 6 were a net 258,200 metric tonnes for the 2005-06 crop, while 121,600 tonnes were sold from the 2006-07 crop, the U.S. Department of Agriculture said Thursday. Trade estimates ranged from 200,000 to 400,000 tonnes.

 

Net 2005-06 sales were down 5% from the previous week and one-third below the prior four-week average. Increases were noted for Nigeria at 74,300 tonnes and Mexico at 52,200 tonnes.

 

Total shipments of 347,800 tonnes were up 11% from 314,600 tonnes the previous week but 20% under the previous four-week average, the USDA said.

 

Wheat shipments for the 2005-06 season now total 21.914 million tonnes versus 22.991 million tonnes last year.

 

With export sales failing to ignite enthusiasm in the market, traders will continue to look to weather forecasts to provide support in the market, particularly for hard red winter wheat. Forecasts for the belt show mostly dry conditions with well above-normal temperatures adding severe stress to the crop in the southern Plains.

 

Ratings for the HRW crop will likely decline in Monday's crop condition report due to the adverse weather, which may support Kansas City Board of Trade futures, said Brian Hoops, senior market analyst and president of Midwest Market Solutions in Yankton, S.D.

 

"I think that Kansas City wheat market is going to add some premium, so I would look for Chicago to be a little bit softer on the opening but Kansas City being pretty firm and trying to move higher right after the opening," he said.

 

In addition, aggressive KCBT/CBOT wheat spreading is expected to continue supporting the Kansas City market and putting pressure on Chicago, Hoops said.

 

Meanwhile, the central and southern Plains were dry Wednesday with well above-normal temperatures ranging from highs of 75-93 Fahrenheit, with the highest readings in northern Texas.

 

Mostly dry conditions are also expected Thursday and Friday. A chance for isolated thundershowers exists Saturday, mostly in northern and eastern areas, with well above-normal temperatures, DTN Meteorlogix said. Mostly dry weather is expected Sunday, while isolated to widely scattered thundershowers are possible Monday.

 

The six- to 10-day outlook calls for near to above-normal temperatures and near to below-normal rainfall.

 

The soft red winter crop in the Midwest is faring well with mostly favorable moisture levels and warm temperatures advancing crop development.

 

The eastern Midwest will see scattered showers and thundershowers in northern and eastern areas Thursday through Saturday, with 0.25-1.00 inch of rain possible. Only sprinkles or a few light showers will be seen elsewhere in the region, Meteorlogix said.

In northern Plains hard red spring wheat areas, mostly dry conditions are expected though Friday, with scattered showers possible Saturday and a few light showers on Sunday and Monday. Dry weather this week is helping to advance planting, which has been delayed by wet weather.

 

Strategie Grains said Thursday that the E.U. will harvest 266.9 million tonnes of grain in 2006-07, nearly unchanged from last month's forecast of 267 million tonnes. The estimate is up 4% on the year on improved yield outlooks.

 

E.U. soft wheat production was revised down by 220,000 tonnes in April to 120.3 million tonnes, up 5% from 2005-06 output.

 

In export news, Japan bought 85,000 tonnes of wheat for May 26-June 30 shipment in a tender concluded Thursday. Of the total, 60,000 tonnes was U.S. origin while 25,000 was from Canada.

 

Technically, CBOT wheat bulls still have momentum and remain poised to make a run at the $4.00 contract high, a technical analyst noted. Resistance is met at $3.82, then $3.85. Support lies at $3.73 1/2 and $3.69.

 

Thursday marks the fifth and final day of the Goldman roll, in which the firm rolls positions from the May contract into later months.