June 27, 2007

 

US Wheat Outlook on Wednesday: Up 2-4 cents on Iraq, Egypt, global tightness

 

 

U.S. wheat futures are expected to start Wednesday's day session 2 to 4 cents higher per bushel with support from Iraqi and Egyptian tenders and shrinking world supplies, traders said.

 

In e-cbot activity, Chicago Board of Trade July wheat rose 4 1/2 cents to US$6.13, and CBOT December wheat ended up 1 1/4 cents at US$6.35 1/4.

 

Iraq issued a new tender to buy thousands of tonnes of hard wheat for delivery in July and August, according to a tender document published by the Grain Board of Iraq. The tender document didn't say how much wheat Iraq intended to buy, but an Iraqi trader familiar with board said Baghdad needed at least 1 million tonnes of wheat for the rest of the year.

 

Separately, another Iraqi trader said the tender came as the board had failed to purchase hard wheat despite tendering twice over the past few weeks. He said the board couldn't cope with the rising price of wheat on the international market.

 

Egypt's state-owned General Authority for Supply Commodities on Wednesday bought 55,000 tonnes of U.S. soft red winter wheat and 60,000 tonnes of Russian wheat. The U.S. sale should give prices a boost, an analyst said.

 

In other export news, Japan bought 110,000 metric tonnes of wheat, including 45,000 tonnes from the U.S., in a routine tender concluded Wednesday, an agriculture ministry official said. The U.S. wheat is scheduled to arrive between July 26 and Aug. 26.

 

China's wheat demand, meanwhile, will be met in the 2007-08 marketing year, with total end stocks likely increasing slightly, the government said. Industrial and feed meal consumption will greatly increase on biofuel demand and the development of the livestock industry, while food consumption will decrease slightly, according to a government statement.

 

Prices also could find support from ongoing fears about the size and quality of harvested U.S. winter wheat, traders said. Cutting delays remain possible in Oklahoma and north-central Texas, where there is a near-daily chance of thundershowers, DTN Meteorlogix said. Thundershower activity in Kansas should be confined to the southeast during the short range period but may become more widespread during the long range, the weather firm said.

 

In the U.S. Northern Plains, warmer-to-hotter weather will help to improve the condition of developing spring wheat so long as soil moisture is adequate, Meteorlogix said. The only area where soils are drier is in the central Montana region.

 

In east Ukraine and southern Russia, which are suffering a drought, rainfall is expected to be less than normal during the next seven days, Meteorlogix said. There will be no significant heat.

 

Dry weather in Argentina is slowing wheat planting and emergence of the crop, especially through the southwest, the weather firm said. No rainfall is expected for at least the next seven.

 

Wheat bulls still have strong upside technical momentum at the CBOT and are looking for more on the upside in the near term, a technical analyst said. The bulls' next upside price objective is to close CBOT December wheat above resistance at US$6.50. The next downside price objective for the bears is closing below psychological support at US$6.00.

 

First resistance is seen at Tuesday's contract high of US$6.43 1/2 and then at US$6.50. First support lies at Tuesday's low of US$6.26 and then at US$6.20.

 

At the Kansas City Board of Trade, wheat futures Tuesday saw the potential beginning of an upside breakout from a bullish pennant pattern on the daily bar chart, the analyst said. The bulls' next upside price objective is closing KCBT July wheat above solid resistance at the contract high of US$6.31. The bears' next downside objective is closing prices below solid support at US$5.90.

 

First resistance is seen at Tuesday's high of US$6.22 and then at US$6.25. First support is seen at Tuesday's low of US$6.05 and then at US$6.00.