June 5, 2007

 

US Wheat Outlook on Tuesday: 4-6 cents up on Ukraine drought, USDA ratings

 

 

U.S. wheat futures are expected to start Tuesday's day session 4 to 6 cents higher per bushel on an increased estimated for drought damage in Ukraine and decreased condition ratings for U.S. winter wheat, floor traders and analysts said.

 

In e-cbot trading, Chicago Board of Trade July wheat rose 5 3/4 cents to US$5.26.

 

Parched conditions in Ukraine have been bullish for wheat recently, and a revised crop damage estimate out overnight should peovide renewed support, a CBOT floor trader said. The report said 650,000 hectares of Ukraine's grain crops have been "irreparably damaged" by the drought and that the extent of the damage is likely to increase because about 10 million total hectares have been affected.

 

A week ago, crops were damaged on 407,000 hectares, Ukraine's deputy prime minister said, adding that "the figure is creeping up to 1 million hectares." Ukraine planted spring grains this year on 8.034 million hectares and winter grains on 6.981 million hectares.

 

Light showers in the region were mostly confined to North Caucasus Russia Monday, but temperatures were much cooler, helping to ease stress on crops, DTN Meteorlogix said. Rain is still needed, especially through eastern Ukraine and in southern Russia, according to the weather firm. The Meteorlogix forecast calls for mainly dry conditions during the next five to seven days.

 

In the U.S., meanwhile, the condition of the winter wheat crop declined four percentage points in the past week, according to the U.S. Department of Agriculture's crop progress reported. The USDA rated 53% of the U.S. winter wheat crop in good-to-excellent condition as of June 3.

 

There have been harvest delays and plant damage in the Central and Southern Plains due to excessive wetness in recent weeks, analysts said. In Kansas, the country's top wheat-producing state, 33% of the crop was rated in good-to-excellent condition, four percentage points below a week earlier.

 

In Oklahoma, only 3% of the crop was harvested, compared to the five-year average of 23%. In Texas, 10% of the crop has been cut, compared to 25% in 2006.

 

The delays and crop damage are friendly to prices amid tight global ending stocks, floor traders noted. There also could be continued technical strength from commodity funds unwinding short positions, they added.

 

Bulls still have solid upside technical momentum at CBOT, but it would not be surprising to see "a corrective pullback" soon after recent gains, a technical analyst said. The bulls' next upside price objective is to close CBOT July prices above solid resistance at Monday's contract high of US$5.31. The next downside price objective for the bears is closing prices below solid support at US$5.00.

 

First resistance is seen at US$5.25 and then at the contract high of US$5.31. First support lies at Monday's low of US$5.18 1/2 and then at US$5.12 1/2.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is closing July wheat above solid chart resistance at Monday's high of US$5.20, the technical analyst said. The bears' next downside objective is closing prices below solid support at US$4.90 a bushel.

 

First resistance is seen at US$5.11 and then at US$5.18. First support is seen at Monday's low of US$5.03 and then at US$4.98.

 

In other news, China had harvested 9.8 million hectares of wheat as of Sunday, accounting for 40% of the country's total wheat planting areas, said the Ministry of Agriculture Tuesday. Hot or very hot temperatures and mostly dry weather will deplete soil moisture for spring planted crops and increase stress to early developing crops in central China, Meteorlogix said.

 

In Argentina, the government opened up the country's wheat export registry for 15,000 metric tonnes of organic wheat and 10,000 tonnes of normal wheat in up to 50-kilogram bags, according to a resolution published in the official bulletin Monday. In March the government closed the registry for new wheat exports in the face of soaring export declarations.

 

Argentina should stay mainly dry during the next five to seven days, conditions that will favor planting while reducing available soil moisture for wheat, Meteorlogix said.

 

In Australia, southeast Queensland and northeast New South Wales will see showers and possible thunderstorms during the next three to five days, according to the weather firm. This will help build soil moisture for wheat growth in one of the drier areas of the Australia wheat belt, Meteorlogix said.