May 25, 2007

 

US Wheat Outlook on Friday: Overnight, crop concerns push 3-5 cents up

 

 

Momentum from overnight gains and ongoing crop concerns are expected to push U.S. wheat futures to open Friday's day session 3-5 cents higher per bushel, traders said.

 

In e-cbot trading, Chicago Board of Trade July wheat finished 5 cents higher at US$4.96.

 

There should be some follow-through buying from the overnight, although trading could turn two-sided as market participants may not want to take large positions ahead of the long Memorial Day weekend, a CBOT floor trader said. The CBOT, Kansas City Board of Trade and Minneapolis Grain Exchange wheat markets will be closed Monday in observance of the holiday.

 

Traders also may step back a bit after pushing prices up sharply on Thursday, a floor broker said. CBOT July wheat on Thursday rose 14 1/2 cents to US$4.91.

 

There remain concerns about damage to the U.S. hard red winter wheat crop from severe weather, including heavy rains, flooding and hail, traders said. Effects from dryness in Ukraine and Europe also are supportive to prices, they added.

 

Ukraine's agriculture ministry said Friday that 400,000 hectares had to be replanted as of May 24 because of a drought, although only 43,000 hectares had been replanted to date. The local government of the Nikolaev region, meanwhile, reported that 500,000 hectares of grain crops had been damaged.

 

"Out of the 500,000 hectares winter grains and 349,000 (hectares) spring grains planted in the region, crops on 500,000 hectares have been destroyed by the drought and the affected area is increasing every day," according to a statement issued by the local government.

 

Ukraine was dry and hot again Thursday, with highs ranging from 88-95 degrees Fahrenheit through the central and east areas, DTN Meteorlogix said. Drier-than-normal weather should continue for central and east Ukraine and south Russia, increasing stress to reproductive and filling wheat, the weather firm said.

 

E.U. wheat suffered from spring dryness, although the weekend and early next week should feature wetter and cooler weather conditions in the west and possibly in the east, Meteorlogix said.

 

In central China, meanwhile, thunderstorms during the week will help replenish soil moisture for winter wheat, but hot and dry weather is expected Friday through Monday and possibly on Tuesday, according to the weather firm.

 

Light showers are on track for West Australia during the weekend, and moderate showers are seen for southeast areas of Australia next week, Meteorlogix said.

 

CBOT July wheat is still in a downtrend from the late-April contract high, although a weekly high close on Friday would give the bulls some good near-term technical momentum, a technical analyst said.

 

The bulls' next upside price objective is to close CBOT July prices above solid resistance at US$5.00, the 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 Thursday's high of US$4.93 1/2 and then at US$5.00. First support lies at US$4.86 and then at Thursday's low of US$4.79 1/2.

 

At the KCBT, the bulls' next upside price objective is closing July wheat above solid chart resistance at the May high of US$4.93, the analyst said. The bears' next downside objective is closing prices below solid support at this week's low of US$4.62 a bushel.

 

First resistance is seen at Thursday's high of US$4.81 and then at US$4.85. First support is seen at US$4.75 and then at Thursday's low of US$4.72.

 

In other news, India doesn't want to buy imported wheat at prices over US$265 per metric tonne from a recent tender issued to import up to 1 million tonnes, a senior government official said Friday. Only one of the bidding companies, Glencore, indicated it may consider selling wheat around US$263.50/tonne for delivery, the official added.

 

The official said bids could be more competitive price-wise if U.S. origin wheat is offered in the next tender. Officials from India's Agriculture Ministry recently visited the U.S. to discuss procedural issues for quality certification with their counterparts there.

 

The government official said suitable grades of U.S. wheat will cost India around US$261/tonne including a freight cost of around US$75/tonne. The official said India and the U.S. are trying to agree on a quality certification procedure that is acceptable to both countries.