April 18, 2006

 

US Wheat Outlook on Tuesday: 1-2 cents higher on HRW crop decline

 

 

U.S. wheat futures are expected to open 1 cent to 2 cents a bushel higher Tuesday on a decline in hard red winter crop conditions, overnight gains and on a mild bounce from lower to sharply lower prices, sources said.

 

In overnight e-cbot trade, May wheat was up 2 cents at US$3.51 1/2 and July was 1 3/4 cents higher at US$3.64 1/4.

 

"It's mainly based on the crop ratings, and plus we had such a sharp downturn yesterday," said Terry Reilly, analyst at Citigroup Global Markets in Chicago.

 

Strong speculative sales drove wheat futures sharply lower Monday, with the heaviest losses seen in Kansas City, where the HRW crop is suffering from drought conditions on the southern Plains.

 

The U.S. HRW crop declined to 39% good to excellent in the week ended April 16, from 41% the previous week, the U.S. Department of Agriculture said Monday afternoon. On the other end of the scale, 32% of the crop is in poor to very poor condition, up from 30% the previous week.

 

Extremely hot, dry conditions took their toll on the crop last week, as most market participants had expected.

 

A Dow Jones Newswires index of crop conditions - where 100% is considered normal - revealed that Texas declined to 55% from 58%, and Oklahoma fell to 62% from 65%.

 

The Kansas HRW crop declined to 88% from 90% the previous week, while Nebraska's ratings edged down to 96% from 97%, the Dow Jones index showed.

 

The overall U.S. HRW crop was rated at 82% of normal, versus 83% the previous week.

 

By contrast, the soft red and soft white crops are faring well at a respective 105% and 106% of normal.

 

The ratings were mostly as expected, but nevertheless provide a touch of support in Tuesday's market, a trader said.

 

Meanwhile, spring wheat plantings in the northern Plains progressed to 10% complete, from 4% the previous week. Still, this is down from 21% complete at the same time last year and the five-year average of 16 percent.

 

Drier weather is needed to advance plantings, particularly in North Dakota where farmers have seeded just 3% of the crop versus 10% one year ago.

 

However, forecasts calls for showers and thunderstorms in eastern areas of the northern Plains for much of this week, which may hinder planting efforts.

 

The southern Plains is expected to see mostly dry conditions with a few thunderstorms in the east late Tuesday, then mostly dry conditions are seen Thursday through Saturday, DTN Meteorlogix said.

 

Reilly said his firm's weather forecast shows a chance for showers Sunday through Tuesday of next week with 75%-80% coverage, but with most rain totals under 3/4 inch. "It may improve crop conditions a bit but it won't bring it back to normal levels," he said.

 

Soft red winter crop areas of the Midwest are expected to see mostly dry conditions with a few scattered showers this week, adding to already sufficient soil-moisture levels.

 

In export news, Iraq's grain board has finalized wheat purchases from Australian suppliers outside of the AWB and also from Germany. Iraq purchased 350,000 metric tonnes of wheat, which was reduced from 500,000 due to a request by the Australian suppliers.

 

Iraq bought 150,000 tonnes of wheat from Germany.

 

Taiwan bought 40,000 tonnes of U.S. No. 1 wheat in a tender concluded Tuesday for May 29-June 12 shipment.

 

Japan seeks 101,000 tonnes of wheat in a tender to be concluded on Thursday, which is expected to include 40,000 tonnes of U.S. wheat, 21,000 tonnes from Canada and 40,000 from Australia.