June 9, 2006

 

US Wheat Outlook on Friday: KCBT seen up 3-5 cents on USDA, CBOT to follow

 

 

U.S. wheat futures were called to open firm Friday, led by gains of 3-5 cents in Kansas City Board of Trade hard red winter wheat futures on bullish U.S. Department of Agriculture 2006 U.S. wheat production and ending stocks data, brokers said.

 

Gains in outside inflationary markets were also seen as supportive, while sharp gains in the dollar versus the euro are bearish for U.S. wheat exports, they added.

 

For its latest wheat production report, the USDA resurveyed farmers in the key wheat producing states of Kansas, Oklahoma, and Texas about their 2006 wheat acreage for this report following a lingering drought.

 

Following this work, the USDA forecast U.S. 2006 all-winter wheat production at 1.264 billion bushels, below the analysts' estimate of 1.299 billion bushels.

 

The average 2006 U.S. winter wheat yield, the USDA said, is now expected to be 40.5 bushels per acre, a 1.9-bushel decrease from a month ago.

 

The USDA May estimate for 2006 U.S. all-winter wheat production was 1.323 billion bushels while 2005 U.S. all-winter wheat production totaled 1.499 billion bushels.

 

The USDA reported U.S. hard red winter wheat production at 659 million bushels, well below analysts' pre-report estimates of 690 million bushels, below the USDA May estimate of 715 million bushels and well below last year's crop of 930 million bushels.

 

Top U.S. winter wheat producer Kansas' crop was seen at 291.4 million bushels, well below the USDA's estimate last month of 319.6 million.

 

However, some U.S. wheat brokers noted trade expectations called for an even smaller final crop tally due to this year's drought.

 

The USDA reported U.S. 2006 soft red winter wheat production at 357.3 million bushels, just about matching analysts' estimates, above the USDA's May estimate of 356 million and well above last year's crop of 309 million bushels.

 

U.S. 2006 white wheat production was seen at 248 million bushels, below the USDA's May estimate of 252 million and below the 2005 U.S. production tally of 260 million bushels.

 

The USDA put 2006 U.S. total wheat production at 1.814 billion bushels, compared with the average analyst estimate of 1.859 billion bushels and the USDA May estimate of 1.873 billion. The 2005 tally was 2.105 billion bushels.

 

The 2006-07 U.S. wheat carryout forecast was lowered to 416 million bushels, 31 million bushels less than was predicted a month ago.

 

In the overnight e-CBOT session, most-active July wheat closed up 3/4 cent at US$3.84 1/4 per bushel.

 

"Prices Thursday closed at a fresh four-week low close," a technical source said. "It still appears a near-term market top is in place. 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$3.88 1/2--Thursday's high--and then at US$3.91. First support was put at US$3.82 1/2--Thursday's low--and then at US$3.80--this week's low.

 

Kansas City Board of Trade July wheat ended overnight up 1 cent at US$4.85 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$4.88--Thursday's high--and then at US$4.95. First support is seen at US$4.77--Thursday's low--and then at US$4.74--this week's low.

 

Cash U.S. hard red winter wheat basis bids were unchanged Friday; soft red winter wheat basis bids were mixed, with a 13-cent gain Memphis and a 2-cent loss in Cincinnati; and spring wheat basis bids were mostly steady except for a 15-cent gain in Aberdeen, South Dakota, grain merchandisers said.

 

In global wheat news, the European Union's grain management committee decided Thursday to open tenders to export 2.0 million metric tonnes of wheat from the free-market for the 2006-07 marketing year, the National Service interprofessional des Grandes Culture, or ONIGC said.