May 17, 2007

 

US Wheat Outlook Thursday: 3-5 cents weaker following overnight, Egypt

 

 

U.S. wheat futures are expected to start on the defensive Thursday, following overnight declines and amid disappointment over a lack of business from Egypt, analysts and traders said.

 

Benchmark Chicago Board of Trade July wheat is called to open 3 to 5 cents lower per bushel.

 

In e-cbot trading, CBOT July wheat slipped 3 3/4 cents to US$4.93. CBOT corn also finished the overnight session lower, and spillover weakness could weigh on wheat, a floor broker said.

 

There had been some hopes that Egypt's state-owned General Authority for Supply Commodities would buy U.S. wheat in a tender, but GASC said Thursday it bought 120,000 metric tonnes of Russian and/or Kazakhstan wheat. GASC decided not to buy any wheat in U.S. dollars because the prices weren't competitive enough compared to the prices offered in Egyptian pounds, an official said.

 

Old-crop U.S. wheat export sales for the week ended May 10 also were disappointing, a CBOT floor trader said. The U.S. Department of Agriculture reported weekly sales were 56,900 metric tonnes, a marketing-year low and 76% below the prior 4-week average. Trade estimates had pegged sales at 150,000 to 350,000 tonnes.

 

New-crop export sales, however, were well above estimates. The USDA said sales of the 2007-08 crop were 337,600 tonnes, while trade estimates were 50,000 to 250,000 tonnes. Major buyers of the new-crop included Thailand, which took 50,000 tonnes, and Jamaica, which bought 42,000 tonnes.

 

In other export news, Japan said bought 130,000 metric tonnes of wheat in a routine tender. The tender, for delivery June 21 to July 20, included 14,000 tonnes of U.S. hard red winter wheat, 24,000 tonnes of U.S. western white wheat and 32,000 tonnes of U.S. dark northern spring wheat.

 

The bulls' next upside price objective is to close prices above solid resistance at this week's high of US$5.07 1/2, a technical analyst said. The next downside price objective for the bears is closing prices below solid support at last week's low of US$4.78.

 

First resistance is seen at US$5.00 and then at Wednesday's high of US$5.03 1/2. First support lies at Wednesday's low of US$4.95 and then at US$4.90.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is closing prices above solid chart resistance at US$5.00. The bears' next downside objective is closing prices below solid support at last week's low of US$4.71.

 

First resistance is seen at US$4.90 and then at this week's high of US$4.93. First support is seen at Wednesday's low of US$4.85 and then at US$4.80.

 

Looking at the weather, scattered showers and thundershowers return to the U.S. Southern Plains on Monday or Tuesday, bringing favorable soil moisture for HRW wheat but increasing risk for above-average disease presence, according to DTN Meteorlogix.

 

In central China, the North China Plain continues much drier than normal during the next five to six days, increasing stress to winter wheat and early corn and soybeans, the weather firm reported.

 

In Australia, thunderstorms are developing in the southeast region Thursday and should cover most of New South Wales during the next couple of days. Meteorlogix said. Rain will recharge soil moisture for early growth of wheat but it may also delay planting somewhat, according to the firm.

 

The western Ukraine will benefit from periodic thundershower activity and cooler temperatures during the next five to seven days, although the next chance for thundershowers in eastern Ukraine appears to be next Thursday and Friday, Meteorlogix said. Until then it will be warm to hot and dry in the region, reducing soil moisture for wheat, the firm said.

 

In Europe, moderate rains again hit Benelux and Germany during the past 24 hours, favoring filling wheat, the weather firm said. The outlook includes drier conditions for western Europe but lingering rains for the east during the five-day period, according to Meteorlogix.

 

Strategie Grains cut its estimate for the European Union's 2007-08 soft wheat crop by 2.8 million tonnes to 124.5 million tonnes due to April's hot and dry conditions, the monthly report showed Thursday. The estimate is still up 7% from last year.