April 13, 2007

 

US Wheat Outlook on Friday: 1-3 cents up on US crop damage expectations

 

 

U.S. wheat futures are expected to start higher Friday on overnight gains and bullish expectations about the declining condition of the U.S. winter wheat crop, traders said.

 

Benchmark Chicago Board of Trade May wheat is called to open up 1 to 3 cents per bushel.

 

In e-cbot trading, CBOT May wheat rose 3 1/2 cents to US$4.61 1/2 per bushel, while CBOT July wheat ended 1 1/2 cents higher at US$4.75 1/2.

 

The U.S. Department of Agriculture on Monday is slated to release its weekly crop progress report, and the trade expects to see a further decline in condition ratings after a hard freeze in the U.S. last weekend, CBOT floor traders said. In its most recent report, the USDA said 64% of the winter wheat crop was in good-to-excellent condition as of April 8, down from 71% as of April 1.

 

There is also starting to be some talk about potential problems with international production, a CBOT floor broker added. Ongoing dryness in Australia and Ukraine could become more of a concern, he said.

 

DTN Meteorlogix reported major winter wheat areas of the Ukraine are expected to be mostly dry or with only a little light precipitation during the next 10 days. Rain is needed to support favorable spring growth of wheat, the weather firm said.

 

In Australia, planting season is approaching for the next winter wheat crop, and the Meteorlogix outlook calls for mostly dry weather or only a few light showers during the next seven days.

 

"Rain is needed through much of this region to replenish soil moisture and irrigation and to recover from long term drought conditions," Meteorlogix said.

 

Rainfall is also needed to support jointing to heading winter wheat in the western areas of China, according to the weather firm. Some increase in shower activity is possible during the next three to five days, and long-range charts suggest a heavier rainfall potential for the southern areas during Monday night or Tuesday, Meteorlogix said.

 

Back in the U.S., moderate to heavy snow and rain will maintain soil moisture for jointing to reproductive wheat in the Southern Plains, according to Meteorlogix. Heavy snow on a jointing wheat crop is normally not much of a concern, the weather firm said, although it could lead to lodging if the plants were weakened by the recent freeze. Lodging is when the plants fall over.

 

Looking at the technical picture for wheat futures, the next upside price objective is to close CBOT July prices above solid resistance at this week's high of US$4.88 1/2, a market technician said. The next downside price objective for the bears is closing prices below solid support at US$4.60.

 

First resistance is seen at Thursday's high of 4.77 and then US$4.80. First support lies at US$4.70 and then at US$4.65.

 

At the Kansas City Board of Trade, bulls' next upside price objective is closing July wheat above solid chart resistance at this week's high of US$4.95, the technician said. The bears' next downside objective is closing prices below solid support at US$4.59 1/4.

 

First resistance is seen at Thursday's high of US$4.83 and then at US$4.85. First support is seen at US$4.80 and then at US$4.75.

 

In other news, Canada's wheat output is projected to fall to 24 million metric tonnes in the crop year to June 2008 from 27 million tonnes in the previous year, a senior official from the Canadian Wheat Board said Friday. A shift in acreage toward oilseeds is likely to bring down output of wheat, he said.

 

India is likely to import between 2 million to 3 million tonnes of wheat in the year to September 2007, down from 6 million tonnes in 2005-06 due to a rise in local output, the CWB official said.