May 9, 2006

 

US Wheat Outlook on Tuesday: Up 2-4 cents on crop rating, forecasts, India

 

 

U.S. wheat futures were called to open up 2-4 cents Tuesday on deteriorating U.S. winter wheat conditions, forecasts for very cold overnight temperatures in the Southern Plains through Friday, fresh global wheat import news and higher outside commodity markets, brokers said.

 

India tendered Monday for 3 million tonnes of wheat, sparking a rally in U.S. wheat futures. The tender will close May 18, and the wheat deliveries will take place in shipment sizes of 30,000-50,000 tonnes between July and October.

 

Moreover, supply worries linger as the U.S. winter wheat crop nears maturity.

 

"There will be opportunities here for frost and light freeze conditions to occur in southwest Nebraska, northwest Kansas and northeast Colorado," said Mike Palmerino, of DTN Weather. "There will be basically three shots for frost and light freeze in those areas- Wednesday, Thursday and Friday mornings.

 

"This could certainly be of some significance," he added, noting that at least 20% of the wheat had headed in northwest Kansas. "There could be damage to flowering wheat."

 

Palmerino also noted memories of a major Mother's Day freeze in 1981 in northwest Kansas' wheat crop could foster concerns.

 

In the overnight e-CBOT session, most-active July wheat closed up 4 cents at US$3.79 1/2 per bushel after closing Monday near the session high and at a fresh four-week high close.

 

"Prices are now in the upper boundary of a choppy trading range," said a technical source. "It will take a close back above resistance at the April high of US$3.82 to provide the bulls with strong upside technical momentum."

 

First resistance for CBOT July wheat was seen at US$3.76 - Monday's high - and then at US$3.78 - last week's high. First support was put at US$3.70 and then at US$3.67 3/4 - Monday's low.

 

Kansas City Board of Trade July wheat ended overnight up 5 cents at US$4.67 per bushel.

 

"Late last week we saw a collapse in volatility in this market that did suggest a bigger price move was on the horizon," the technical source said. "The bigger move occurred Friday and there was follow-through strength Monday. Bulls have the solid technical advantage. Look for higher volatility in the near term, which is typical for serious weather markets in grains. It will take a close above resistance at the contract high of US$4.71 1/2 to provide the bulls with strong upside technical momentum. A close below the late-April low of US$4.26 would provide the bears with fresh downside technical momentum.

 

First resistance for KCBT July wheat was seen at US$4.62 1/2- Monday's high- and then at US$4.71 1/2. First support was seen at US$4.52 - Monday's low - and then at US$4.46.

 

The U.S. Department of Agriculture reported late Monday that 38% of the U.S. winter wheat crop was in poor-to-very poor condition as of Sunday, unchanged from last week.

 

Thirty-five percent of the nation's winter wheat crop was in good-to-excellent condition, down 1 percentage point from last week's rating.

 

Traders had expected a slight improvement due to recent rains, leading some analysts to speculate that the Kansas-Colorado-Nebraska wheat crop was too damaged to appreciate recent improved growing conditions.

 

The Kansas winter wheat crop was 23% in good-to-excellent condition compared to 26% the previous week; the crop was 39% in very poor-to-poor shape versus 37% in that shape last week.

 

Seventy-two percent of Kansas' wheat was headed as of Sunday, compared to 32% last year and 38% for the 5-year average.

 

Scouts from the 2006 Wheat Quality Council crop tour pegged Kansas 2006 winter wheat crop at 319 million bushels, down from last year's production of 380 million bushels.

 

In Oklahoma, the second largest U.S. winter wheat producing state last year, the wheat crop was 74% in very poor-to-poor shape, an improvement from the previous week's 76% in that shape.

 

Wheat heading was nearly complete, while half of the wheat was in the soft dough stage of development versus the 5-year average of 22%, the USDA said.

 

"While the recent very beneficial rains and cool temperatures we have been receiving in Oklahoma (and predictions for the next 7 days) can not change the already determined number of tillers, head size and kernels per head, it will help preserve quality," said Mark Hodges, executive director of Oklahoma Wheat Commission, in a report released late Monday.

 

"I am particularly focusing on test weight and thousand kernel weight and complete filling of what kernels are there," he added. "The final number of bushels harvested in Oklahoma this year will still be primarily a function of harvested acres, which is a number that I don't believe anyone knows at this point.

 

"Normally we would look at extended late spring wet patterns as detrimental to production, because of the disease implications, but we are now late enough in this crop's development with very little moisture related diseases, we will benefit by increased quality," he added.

 

The Oklahoma Wheat Commission last week forecast 2006 Oklahoma winter wheat production at 67 million bushels, down from last year's 128 million bushels.

 

Meanwhile, U.S. soft red winter wheat conditions remained excellent, with ratings improving in key producer Ohio. Eighty-three percent of the state's wheat crop was in good-to-excellent condition as of Sunday, up 2 percentage points from the previous week, the USDA said.

 

There were 30 deliveries posted Tuesday against CBOT May wheat futures with the last date available of May 3.

 

Wheat registrations late Monday at the CBOT totaled 1,672 lots, up 12 lots from the previous day.

 

There were 135 redeliveries of KCBT wheat Tuesday and no deliveries of MGE wheat.

 

Cash U.S. hard red winter wheat basis bids were mostly steady to down 1 cent in Hutchinson, Kan. Tuesday; soft red winter wheat basis bids were steady to firm, with a 2-1/2 cent gain in Kansas City truck market; and spring wheat basis bids were mixed, grain merchandisers said.

 

In overnight U.S. wheat export news, Japan sought 110,000 tonnes of wheat including 50,000 tonnes of U.S. wheat.

 

In other global news, India revised downward its wheat output estimates for the current crop year to June 2006 to 71.54 million metric tonnes from an earlier projection of 73.06 million tonnes.