April 17, 2006

 

US Wheat Outlook on Monday: 2-3 cents lower on e-CBOT, rain forecasts

 

 

U.S. wheat futures are expected to open 2 cents to 3 cents per bushel lower Monday on a weak overnight session, overbought conditions and as scattered rains fell over parts of U.S. production areas during the holiday weekend, sources said.

 

In overnight e-cbot trade, May wheat was down 2 1/2 cents at US$3.55 and July was down 3 cents at US$3.68 1/4.

 

Wheat futures have seen strong price gains in the past week, a bull market needs to be fed regularly and sellers were a bit tentative last week, all of which are creating a slightly bearish atmosphere at Monday's market opening, said Shawn McCambridge, senior grains analyst at Prudential Financial in Chicago.

 

In addition, soft red winter growing areas of the Midwest received moisture over the weekend, he said.

 

However, the hot, dry conditions in the southern Plains continued over the holiday weekend and likely increased crop stress.

 

In fact, many traders and analysts expect to see a decline in the Texas and Oklahoma hard red winter crops when the U.S. Department of Agriculture issues its weekly crop progress report Monday at 1600 EDT.

 

"But then you look at the extended forecast and people have a little more confidence in a Thursday to Friday system coming into the southern Plains and moving up through Kansas, Oklahoma and Nebraska," said McCambridge.

 

Mostly dry conditions were seen over the southern Plains in the past four days, though there were light to moderate showers in northern areas on Saturday with rain totaling 0.10-0.40 inch. Temperatures in the region ranged from a low of 72 Fahrenheit to a high of 100 degrees on Thursday, DTN Meteorlogix said.

 

Mostly dry conditions are expected Monday, with a chance for isolated thunderstorms in the eastern Plains. Western and north-central Texas and southern Oklahoma could see showers with 0.10-0.50 inch of rainfall Thursday into Friday. The six- to 10-day forecast calls for near- to below-normal rains in the west and north, near to above normal in the southeast and possibly south-central areas of the southern Plains, Meteorlogix said.

 

In the northern Plains hard red spring wheat areas, mostly dry conditions with a few scattered showers were seen over the weekend. Showers and thunderstorms are expected to develop Monday from west to east, with rain amounts of 0.20-0.75 inch. Dry weather is expected in the west Tuesday with rain or snow showers in the east.

 

Meanwhile, funds added 4,397 long positions to the CBOT wheat market in the week to April 11, to total 66,539 positions, or 17.2% of open interest, the Commodity Futures Trading Commission's Commitments of Traders report showed. Funds decreased short positions by 3,483 to 75,255 positions, or 19.4% of open interest.

 

At the KCBT, funds also increased long positions by 10,287 to 51,928, or 40% of open interest, which coincides with the price move to new contract highs.

 

At the MGE, funds increased long positions by 1,402 to 11,609, or 23% of open interest, which also followed the move to fresh contract highs.

 

In other news, China's wheat futures were mostly steady in the week to Monday, though trading interest increased from the previous week as industry players expect the government's minimum purchasing price policy to be implemented soon. In Henan, China's largest wheat-producing province, average quality wheat was mostly unchanged at RMB1,320-1,380 a metric tonne.

 

Ukraine planted spring grains on 2.52 million hectares to April 14, compared to 3.7 million hectares on the same date last year, which equals 43% of the planned total area. Despite delays caused by adverse weather, spring planting would be complete by May 1, the country's agriculture minister said.