June 26, 2006

 

US Wheat Outlook on Monday: Weaker start following corn, soybeans

 

 

U.S. wheat futures are expected to start Monday's session weaker, following losses in overnight e-cbot trade and a softer trade expected for corn and soybean futures at the Chicago Board of Trade.

 

Most-active September CBOT wheat futures are called to open 2-3 cents a bushel lower. In overnight e-cbot trade Nearby July fell 2 1/2 cents to US$3.60 3/4 and September also drooped 2 1/2 cents US$3.79.

 

"Wheat is going to get dragged down with the (expected) losses in corn and soybeans," said a veteran commission house broker.

 

Losses in the Minneapolis Grain Exchange could be muted by forecasts calling for stressful weather conditions for developing spring wheat.

 

DTN Meteorologix said the heat and dryness in the northern spring wheat areas, especially in the western wheat areas will increase stress during this week. The eastern wheat areas will not be as hot or as dry. The long-range forecast repeats this scenario, with temperatures above normal west, near to above normal east. Rainfall is expected to be near to below normal. The weather firm sees no significant concerns for the harvest as thundershowers, if any, will occur with low coverage during the week.

 

"They are really having problems out there, especially in the west, so we'll see how much influence lower corn and soybean prices will have," the broker said.

 

Australia's wheat regions will need more rain to enable further crop plantings and help germination and growth of those already sown, said Abare, the government's chief commodities forecaster, the Australian Bureau of Agricultural and Resource Economics, in its quarterly outlook publication issued Monday. Abare made the comments in reiterating a forecast for wheat output issued earlier in June that production this crop year will fall to 22.8 million metric tonnes from an actual 25.1 million tonnes last crop year ended March 31, 2006.

 

Analysts said the news will have little impact since Abare kept the wheat crop size unchanged. In other news, China's wheat prices remained steady last week at government-set minimum purchase prices, traders said. Government-designated warehouses have been buying wheat at preset prices since June 1, as the government hopes to protect farmers' incomes in an oversupply market. The policy will be enforced until Sept. 31.

 

Argentina's 2005-06 wheat sales are running behind last year's totals, the Agriculture Secretariat said. For the week of June 23, wheat sales the totaled 7.05 million metric tonnes. By this time last year Argentina had sold 9.025 million tonnes of 2004-05 wheat.

 

The Commodity Futures Trading Commission said Friday in its commitments of traders report funds decreased long CBOT wheat futures positions in the week to June 20. Non-commercial accounts, or the funds, decreased long positions by 13,003 to total 72,647 positions. Funds also lightened short positions by 4,820 to 76,270.

 

The CFTC said funds decreased long wheat futures positions at the Kansas City Board of Trade and the MGE. KCBT funds lightened long positions by 980 contracts to total 57,792 positions. Funds increased shorts slightly by 269 contracts to 6,595. MGE funds decreased longs by 2,766 to total 14,406. Fund shorts, meanwhile, fell just 40 contracts to 397.

 

Modest support might come from a report from German bank HVB, which expects a rise in global corn and wheat futures as a result of tightening stocks.

 

"Wheat stockpiles are at a 25-year low," said the HVB report.

 

HVB said corn stockpiles in the U.S., the world's largest exporter at 75% of global export volume, are expected to be half the preseason level due to a lower crop and increased use to make ethanol.