April 19, 2007

 

US Wheat Outlook on Thursday: Up 6-8 cents on overnight, production worries

 

 

U.S. wheat futures are expected to start Thursday's day session firmer after marching higher overnight and amid concerns about possible production shortfalls, traders said.

 

Wheat futures are called to open 6 to 8 cents per bushel higher.

 

In e-cbot trading, CBOT July wheat jumped 6 1/2 cents to US$4.95 1/2.

 

Widespread storms and some heavy rains will likely hit the U.S. Southern Plains during the Sunday to Tuesday time frame, causing local flooding and possibly crop damage, DTN Meteorlogix reported.

 

The forecast for potentially-damaging weather comes as producers are still assessing the condition of the U.S. winter wheat crop after a hard freeze earlier this month. There appears to be growing support for the idea that the crop will not be able to bounce back as well as it did after a similar freeze in 1997, a CBOT floor trader noted.

 

"The market will continue to react to field assessments of the freeze damage in the coming days," a technical analyst said.

 

Concerns about dryness in wheat growing areas of Europe, the Ukraine and Australia also are seen to be underpinning prices, an analyst said.

 

Parts of the western Ukraine saw rainfall of 0.25-0.75 inch during the past 24 hours, helping to replenish soil moisture for wheat, Meteorlogix said. More rain, however, is needed and little is expected to fall during the next 10 days, the firm said. Also, conditions are expected to turn colder during the 10-day period, slowing development of wheat, Meteorlogix added.

 

In Australia, rain is needed through much of the wheat regions to replenish soil moisture and irrigation and to recover from long term drought conditions, according to Meteorlogix. Planting of the winter wheat crop is set to begin early next month.

 

Australian Prime Minister John Howard said Thursday that a review of the water availability of the Murray-Darling Basin, which generates about 40% of the nation's agricultural and grazing income, had found dangerously low levels. Without heavy rain by mid-May, farmers in the Murray-Darling region won't receive any irrigation water allocation for the 2007-08 year, Howard said.

 

In other news, weekly export sales figures were within analysts' estimates. The USDA said sales for the week ended April 12 were 342,800 metric tonnes, while analysts had expected sales of 200,000 to 400,000 tonnes.

 

The sales were down 51% from the previous week and 28% below the prior four-week average. Major buyers included Japan, which took 70,600 tonnes; Yemen, which bought 46,000 tonnes; and Jamaica, which bought 42,000 tonnes.

 

In a separate development, three South Korean flour mills bought 21,200 metric tonnes of U.S. No. 1 wheat from trading house Toepfer at a tender concluded Thursday, a trader in Seoul said. The shipment is expected to reach South Korea sometime in June.

 

The bulls' next upside price objective is to close CBOT July wheat above solid resistance at this week's high of US$5.03, the technical analyst said. The next downside price objective for the bears is closing prices below solid support at US$4.75.

 

First resistance is seen at US$4.95 and then Wednesday's high of US$4.98 1/2. First support lies at Wednesday's low of US$4.88 and then at US$4.82 1/2.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is closing July wheat above solid chart resistance at this week's high of US$5.00. The bears' next downside objective is closing prices below solid support at US$4.80.

 

First resistance is seen at Wednesday's high of US$4.95 and then at US$5.00. First support is seen at this week's low of US$4.86 and then at US$4.83.