May 8, 2006

 

US Wheat Outlook on Monday: Down 1-3 cents on profit-taking,Kansas rains

 

U.S. wheat futures were called to open down 1-3 cents per bushel Monday on a profit-taking setback from Friday's rally and on overnight rains in western Kansas, brokers said.

 

Wheat futures rallied sharply Friday on smaller-than-expected estimates for Kansas winter wheat production from an annual crop tour and private analytical firm Informa Economics, they noted.

 

The crop tour forecast Kansas production at 319.2 million bushels versus last year's actual production of 380 million; while Informa Economics forecast the U.S. 2006 hard red winter wheat crop at 690 million bushels, down from 929.8 million in 2005.

"Rains of 0.50 to 1.00 inch, locally heavier, fell in western and southern Kansas, with good coverage," said Joel Burgio, of DTN Weather. "This was a combination of over the weekend and last night. There were also good rains in northwestern Kansas mostly overnight of 0.50 inch. Temperatures were below normal."

 

Kansas is the top U.S. winter wheat producing state. Its crop is being closely watched this year as drought has slashed crop production estimates for other key producers Texas and Oklahoma.

 

In the overnight e-CBOT session, most-active July wheat closed up unchanged at $3.72 1/4 per bushel.

 

"Prices Friday closed higher and near mid-range but did close at the weekly high close," a technical source said.

 

"That does give the bulls some fresh momentum heading into the new trading week. It will take a close below the March low of $3.51 to provide the bears with some good downside technical momentum. It will take a close back above resistance at the April high of $3.82 to provide the bulls with solid upside technical momentum."

 

First resistance for CBOT July wheat was seen at $3.75 and then at $3.78 - Friday's high. First support lies at $3.67 - Friday's low - and then at $3.65.

 

Kansas City Board of Trade July wheat ended overnight down 4 1/2 cents at $4.51 1/2 per bushel.

 

"Prices gapped higher on the daily bar chart and closed at the weekly high close," said a technical source. "We saw a collapse in volatility in this market last Monday through Thursday, which did suggest a bigger price move was on the horizon - and it occurred Friday. Bulls again have the solid technical advantage. A three-week-old downtrend line on the daily bar chart was negated Friday. Look for higher volatility in the near term. It will take close below the late-April low of $4.26 to provide the bears with fresh downside technical momentum."

 

First resistance for KCBT July wheat was seen at $4.59 - Friday's high - and then at $4.62 1/2. First support is seen at $4.50 and then at $4.46 - Friday's low.

 

The CFTC reported Friday that speculators in CBOT wheat futures and options combined for the week ended May 2 were just slightly net long: long 69,159 lots, up 3,056 contracts from the week before; and short 67,588 contracts, up 2,077 lots from the previous week.

 

For KCBT wheat futures and options combined, speculators were long 47,903 lots, down 1,180 contracts, and short 4,027 contracts, down 1,003 lots from the previous week.

 

For MGE spring wheat futures and options combined, speculators cut their long holdings by 1,505 lots to 12,297 contracts and increased their short holdings by 17 lots to 481 contracts.

 

There were 101 deliveries posted Monday against CBOT May wheat futures with a customer of USA Blue stopping 75 lots. The last date available was May 3. Wheat registrations late Friday at the CBOT totaled 1,660 lots.

There were 136 redeliveries of KCBT wheat Monday and no deliveries of MGE wheat.

 

Cash U.S. hard red winter wheat basis bids were mostly steady to up 1 cent Monday; soft red winter wheat basis bids were mixed; and spring wheat basis bids were also mixed, grain merchandisers said.

 

In U.S. wheat export news, Jordan said Saturday it is tendering to buy 120,000 metric tonnes of U.S. wheat.

In global wheat news, Syria said Sunday it was tendering to sell 50,000 metric tonnes of Syrian wheat.

 

Iraq has finalized a contract to buy 350,000 metric tonnes of wheat from Australian suppliers outside the wheat monopoly AWB Ltd. (AWB.AU), the board's head Khalil Assi told Dow Jones Newswires Monday.

 

India may import up to 5.5 million metric tonnes of wheat in the current financial year to March 2007, a senior government official said Friday.