May 30, 2006

 

US Wheat Outlook on Tuesday: Up 2-4 cents on HRW crop worries, gold gains

 

 

U.S. wheat futures were called to open up 2-4 cents per bushel on Tuesday after firm overnight trade on concerns that lingering heat in the U.S. Plains will harm the already drought-stricken U.S. hard red winter wheat crop and on gains in gold futures, brokers said.

 

U.S. futures exchanges were closed on Monday in observance of the Memorial Day holiday.

 

Traders expected the U.S. Department of Agriculture to report late Tuesday a decline in the U.S. winter wheat crop's condition. The USDA last Monday said the U.S. winter wheat crop was 30% in good to excellent shape.

 

Weekend temperatures in the U.S. Plains were above to much above-normal, with highs up to 103 degrees Fahrenheit Saturday in Nebraska, according to Joel Burgio of DTN Weather.

 

Light rains, mostly over the northern and eastern U.S. Plains HRW belt, fell overnight and more were expected Tuesday and into Wednesday in the southern part of the belt, he said.

 

Slightly cooler temperatures were expected on Tuesday and Wednesday, but readings were then forecast to rise to above-normal on Thursday, Burgio said. Dry conditions and above-normal temperatures were expected on Friday and Saturday in the U.S. HRW belt.

 

In the overnight e-CBOT session, most-active July wheat closed up 2 3/4 cents at US$4.18 1/4 per bushel.

 

"Bulls still have the technical advantage," a broker 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 was seen at US$4.21 - Friday's high - and then at US$4.25. First support was put at US$4.13 - Friday's low - and then at US$4.10.

 

Kansas City Board of Trade July wheat ended overnight up 4 cents at US$5.10 per bushel.

 

"Prices closed nearer the session high," a technical source said. "Bulls still have the technical advantage. 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 was seen at US$5.09 3/4 -Friday's high - and then at US$5.14. First support was seen at US$4.99 - Friday's low - and then at US$4.95.

 

The CFTC reported Friday that speculators in CBOT wheat futures and options combined for the week ended May 23 were long 114,872 lots, up 16,263 contracts from the week before and short 73,675 contracts, up 9,706 lots from the previous week.

 

For KCBT wheat futures and options combined, speculators were long 58,259 lots, up 157 contracts, and short 4,489 contracts, down 916 lots from the previous week.

 

For MGE spring wheat futures and options combined, speculators boosted long holdings by 2,455 lots to 18,521 contracts and increased their short holdings by 33 lots to 510 contracts.

 

Cash U.S. hard red winter wheat basis bids were steady to weak, with a 7-cent loss at the Texas Gulf; soft red winter wheat basis bids were mixed, with a 15-cent gain in St. Louis; and spring wheat basis bids were also mixed, grain merchandisers said.

 

U.S. wheat export news was quiet.

 

Japan said it wouldn't hold its weekly tender this week. The next tender may be June 6.

 

In global wheat news, India said it may be able to import only 800,000 tonnes wheat from AWB and Swiss trading company Agrico in a tender that originally sought 3 million tonnes.