June 8, 2006

 

US Wheat Outlook on Thursday: Flat-down 1 cent on outside markets, dollar

 

 

U.S. wheat futures were called to open flat to down 1 cent Thursday following weak outside markets and dollar strength, however positioning ahead of Friday's USDA data could limit losses, brokers said.

 

Gold futures were called to open Thursday down US$9.60 per ounce while the dollar strengthened against the euro Thursday.

 

"Weekly U.S. wheat exports sales were within estimates and the dollar index is sharply higher, along with outside markets being lower," said Vic Lespinasse, a CBOT grain analyst for AG Edwards & Sons. "I'm looking for a flat to weak open, and see the same for CBOT corn and soybeans."

 

U.S. weekly wheat export sales totaled 337,400 tonnes (old- and new-crop combined), with the range of traders' estimates of 300,000 to 450,000 tonnes.

 

Meanwhile, the average analyst estimate for U.S. 2006 all-winter wheat production ahead of Friday's U.S. Department of Agriculture crop report was 1.299 billion bushels, with estimates ranging from 1.270 billion to 1.335 billion bushels.

 

The USDA has said that it will resurvey farmers in key wheat growing states of Kansas, Oklahoma, and Texas as to 2006 wheat acreage for this report following the lingering drought. Many wheat traders say that a new survey could result in smaller U.S. winter wheat production data.

 

Analysts expected the USDA to report U.S. 2006 hard red winter wheat production of 690 million bushels, below the USDA May estimate of 715 million bushels and well below last year's 930 million bushels.

 

U.S. 2006 soft red winter wheat production was seen at 358 million bushels, above the USDA's May estimate of 356 million and well above last year's crop of 309 million bushels.

 

In the overnight e-CBOT session, most-active July wheat closed down 1 cent at US$3.86 3/4 per bushel.

 

"It still appears a near-term market top is in place," a technical source said. "The next downside price objective for the bears is solid technical support at US$3.75. It will take a close back above resistance at US$4.00 to provide the bulls with any fresh upside technical momentum."

 

First resistance for CBOT July wheat was seen at US$3.91 - Wednesday's high - and then at US$3.95. First support lies at US$3.83 and then at US$3.80 - Wednesday's low.

 

Kansas City Board of Trade July wheat ended overnight unchanged at US$4.87 per bushel.

 

"The bears still have some downside technical momentum," the technical source said. "Their next downside objective is closing prices below support at the April high of US$4.71 1/2. It will take a close back above major psychological resistance at US$5.00 a bushel to provide the bulls with fresh upside technical momentum."

 

First resistance for KCBT July wheat was seen at US$4.89 - Wednesday's high - and then at US$4.95. First support is seen at US$4.74 - Wednesday's low - and then at US$4.71.

 

Cash U.S. hard red winter wheat basis bids were unchanged; soft red winter wheat basis bids were mixed, with a 5-cent loss in the Toledo and Little Rock bids; and spring wheat basis bids were also mixed, with a 5-cent gain in the Minneapolis rail bid, grain merchandisers said.

 

In wheat export news, Japan bought 106,000 tonnes of wheat including 70,000 tonnes of U.S. wheat. Tunisia bought 125,000 tonnes of wheat Thursday, according to European traders.

 

Traders also noted news wire reports that India had said it would soon tender for 2.3 million tonnes of wheat, with less stringent tender terms.

 

"Whether the U.S. gets some of that tender, I don't know," AG Edward's Lespinasse said, echoing previous analysts' estimates that freight costs helped make U.S. wheat noncompetitive to India.