May 24, 2006

 

US Wheat Outlook on Wednesday: Down 2 cents on technical, harvest, informa, gold

 

 

U.S. wheat futures were called to open down 2 cents Wednesday on technical sales after Tuesday's late slide, U.S. hard red and soft red winter wheat harvest pressure, a private firm's estimate of additional 2006 U.S. spring wheat plantings and weak gold futures, brokers said.

 

"It seems like we have more negative than positive news this morning," said Don Roose, of U.S. Commodities.

 

"We're right on the teetering point where harvest overrides weather," he said of the building U.S. winter wheat harvest pressure.

 

"Yields that we're picking up so far are slightly better than what the trade had anticipated. Maybe the abandonment rates might be not as low, but we'll see," Roose added. "We're hearing that some of the areas of Texas are better than expected - anywhere from 15 to 30 bushels per acre."

 

Wednesday's estimate by Informa Economics of 2006 U.S. spring wheat plantings of 14.75 million acres and an all-wheat U.S. plantings figure of 58.2 million acres were also bearish.

 

"We had a poor technical close and the outside markets are weak," Roose continued "And there is a lot of chatter this morning about the possible human to human transmission of bird flu."

 

World health officials worried Wednesday that six deaths within one Indonesian family may have resulted from human-to-human transmission of bird flu.

 

Cash U.S. spot soft red winter wheat basis bids were mostly weak Wednesday, with a 20-cent loss in St. Louis and a 19-cent loss in Louisville, Ken.

 

Cash U.S. hard red winter wheat basis bids were mostly steady to up 3 cents in Portland, Ore.; and spring wheat basis bids were steady, grain merchandisers said.

 

In the overnight e-CBOT session, most-active July wheat closed down 1 3/4 cents at US$4.18 after setting a new contract and 3-1/2-year top Tuesday of US$4.33 per bushel.

 

"Bulls still have the solid technical advantage, but prices are in historically "thin air" at present levels," a technical source said. "The next upside price objective for the bulls is closing prices above solid longer-term resistance at the 2002 high of US$4.34 a bushel, basis nearby futures. It would take a close below solid support at US$4.00 to provide the bears with some fresh downside technical momentum.

 

First resistance for CBOT July wheat was seen at US$4.25 and then at US$4.33 - the contract high - and then at US$4.34. First support was put at US$4.18 - Tuesday's low - and then at US$4.10 - this week's low.

 

Kansas City Board of Trade July wheat ended overnight down 4 cents at US$5.08 after the nearby month set Tuesday on continuous charts a near 10-year top of US$5.22 1/2 per bushel.

 

"Bulls still have the solid technical advantage," the technical source said. "Look for higher volatility in the near term. The next major upside price objective for the bulls is closing prices above longer-term resistance at US$5.50 a bushel, basis nearby futures. A close below support at US$4.70 would provide the bears with some fresh downside technical momentum.

 

First resistance for KCBT July was seen at US$5.22 1/2 - the contract high - and then at US$5.25. First support was seen at US$5.08 and then at US$5.00 per bushel.

 

In U.S. wheat export news, South Korea bought 21,000 tonnes of U.S. wheat.

 

In global news, the chairman of Australian wheat exporter AWB Ltd. (AWB.AU) said the firm hoped to negotiate a commercial settlement in a dispute with India over quality specifications that is delaying the delivery of a 500,000 metric tonnes. The dispute centered on a zero-tolerance clause for ergot fungi in the Indian contract.