May 26, 2006

 

US Wheat Outlook on Friday: Up 2-3 cents on pre-holiday, gold, HRW crop

 

 

U.S. wheat futures were called to open up 2-3 cents Friday on positioning ahead of the extended holiday weekend, firm gold markets and worries about the U.S. hard red winter wheat crop amid lingering hot U.S. Plains weather, brokers said.

 

U.S. futures exchanges will be closed on Monday in observance of the Memorial Day holiday. Futures markets will close at normal hours on Friday.

 

Forecasts for the U.S. hard red winter wheat belt called for temperatures to remain above normal, with highs in the upper-80s to mid-90s Fahrenheit, through Sunday.

 

The six- to 10-day weather forecast for the key U.S. hard red winter wheat growing belt called for above to well-above normal temperatures, according to DTN Weather.

 

Kansas State University crop specialist Jim Shroyer told Dow Jones on Thursday that hot temperatures next week could result in damage to the north central Kansas wheat crop.

 

The crop in Kansas, the top U.S. wheat producer, has already suffered due to drought and some disease pressure.

 

"Wheat is a cool season crop," Shroyer said. "It can be standing in water basically and still die because of the heat. So water is good, but given a choice between lots of water or cool weather, we'd take the cool weather."

 

Kansas City Board of Trade hard red winter wheat futures on Tuesday set a near-10-year high of US$5.22 1/2 per bushel as traders priced in concerns about a short U.S. hard red winter wheat crop.

 

Kansas City Board of Trade July wheat ended overnight down 3/4 cent at US$4.98 per bushel.

 

"Bulls still have the technical advantage, but a market top may be close at hand," a technical source said. "It's not unusual for market tops to occur before the actual extent of the damage to the crop is confirmed, amid a weather market.

 

"Look for higher volatility in the near term," the technical source said. "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 wheat was seen at US$5.04--Thursday's high--and then at US$5.08. First support was seen at US$4.97--Thursday's low--and then at US$4.91.

 

In the overnight e-CBOT session, most-active July wheat closed up 1 3/4 cents at US$4.11 1/4 per bushel.

 

"The market has become tired at higher levels and more downside pressure in the near term would not be surprising," a technical source said. "All of the bullish fundamental news appears to have been factored into the wheat market.

 

But bulls still have the technical advantage," the technical source added. "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$4.15--Thursday's high--and then at US$4.20. First support lies at US$4.07--Thursday's low--and then at US$4.04.

 

Cash U.S. hard red winter wheat basis bids were mostly steady to up 1 cent in Enid, Okla.; soft red winter wheat basis bids were steady to firm, with a 7-cent gain in Memphis, Tenn.; and spring wheat basis bids were mostly steady Friday, grain merchandisers said.

 

Overnight U.S. wheat export news was quiet.

 

In global wheat news, the Canadian Wheat Board left its monthly price projections for wheat that will be sold during the 2005-06 crop year, which began Aug. 1, 2005, unchanged.

 

Values for durum were CUS$2 per tonne metric tonne higher, with the exception of No. 5 CWAD, which was left unchanged.

 

The CWB said the U.S. futures market has rallied considerably over the past month, driven by speculative buying and the deterioration of the U.S. hard red winter wheat crop.

 

However, prices in the offshore market, which are being largely driven by wheat supplies outside of North America, have been slow to respond, the CBWB noted.

 

Moreover, the Canadian dollar has strengthened dramatically against its U.S. counterpart since the March CWB price forecast, offsetting stronger price expectations.