June 21, 2007

 

US Wheat Outlook on Thursday: 4-7 cents higher on demand, yield worries

 

 

U.S. wheat futures are expected to start Thursday's day session 4 to 7 cents firmer per bushel on strong export demand and concerns about yields in the Southern Plains, floor traders said.

 

In e-cbot trading, Chicago Board of Trade July wheat rose 3 cents to US$6.08.

 

The U.S. Department of Agriculture said weekly export sales for the week ended June 14 totaled 541,000 metric tonnes, 31% above the previous week and above analyst estimates of 150,000 to 400,000 tonnes. Major buyers included Italy, which took 75,000 tonnes, Chile, which bought 73,500 tonnes, and Nigeria, which bought 65,900 tonnes.

 

The solid sales are impressive considering recent high prices, a CBOT floor trader said. There also is bullish chatter that Egypt will be back in the market soon to buy more wheat, he added.

 

Egypt's cabinet approved a decision to supply its main wheat buyer, the General Authority for Supply Commodities, or GASC, with an extra 2 billion Egyptian pounds (US$351 million) of spending, according to a report. Approval for the spending increase came as a result of a rise in world market prices for commodities, the report said.

 

GASC canceled a tender to buy a minimum of 55,000-60,000 metric tonnes of wheat June 15 citing unsuitably high prices as the reason.

 

There are long-term bullish implications from news that Morocco will increase its wheat imports this year, traders said. U.S. producers hope to secure extra export business as world wheat supplies are shrinking. The USDA this month pegged 2007-08 global carryout at a 30-year low.

 

Japan, meanwhile, said it bought 48,500 metric tonnes of wheat in a routine tender concluded Thursday for delivery Aug. 1-31. The tender included 25,000 tonnes of U.S. wheat.

 

Concerns about poor harvest results in the U.S. Southern Plains remain supportive, as well. Reports of poor yields coming from hard red winter wheat fields provided the markets with "bullish fuel" on Tuesday, a technical analyst said.

 

Hotter temperatures appear likely for the Southern Plains' western and northern areas during the coming days but not so much for southeastern areas, according to DTN Meteorlogix. Drier, hotter weather is needed to improve the condition of the maturing wheat and to allow for better progress in wheat harvests, the weather firm said.

 

The bulls' next upside price objective is to close CBOT December wheat above resistance at US$6.50, the technical analyst said. The next downside price objective for the bears is closing prices below psychological support at US$6.00.

 

First resistance is seen at Wednesday's contract high of US$6.31 1/2 and then at US$6.40. First support lies at US$6.15 and then at Wednesday's low of US$6.06.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is closing prices above solid resistance at the contract high of US$6.31. The bears' next downside objective is closing prices below solid support at US$5.75.

 

First resistance is seen at Wednesday's high of US$6.22 and then at US$6.31. First support is seen at US$6.00 and then at Wednesday's low of US$5.95.

 

In other news, Australian wheat production might not reach the level of an official forecast of 22.5 million metric tonnes in light of poor seasonal conditions in some key growing areas, the grains section president of farmer lobby Agforce Queensland said. There is a chance for some light shower activity in Australia's western wheat belt during Friday and Saturday but much more rain will be needed to overcome dryness, Meteorlogix said.

 

Drought-stricken eastern Ukraine and southern Russia have seen a few significant thundershowers during the past 24 hours, although coverage is somewhat uncertain, Meteorlogix said. More widespread rain is needed to ease dryness.

 

The Meteorlogix outlook for the east Ukraine and North Caucasus Russia calls for drier weather than normal weather during the next seven days. A few showers will be in the area at times, the weather firm said.

 

Argentina's Agriculture Secretariat upped its forecast for 2007-08 wheat area to 5.5 million hectares, compared with 5.6 million hectares planted in 2006-07. Last month, the Secretariat estimated 2007-08 wheat area at 5.2 million hectares.

 

There is a chance for some light shower activity in Argentina's dry western wheat belt during Friday and Saturday, but the crop needs much more rain, Meteorlogix said.