July 5, 2006

 

US Wheat Outlook on Wednesday: Steady-firm after Monday's rally

 

 

Traders and analysts expect U.S. wheat futures to open steady to firmer Wednesday as futures take a breather but are also seen receiving support from ongoing drought worries for the northern Plains hard red spring crop.

 

In overnight trade basis September contracts, Chicago Board of Trade wheat was unchanged at US$4.02, Minneapolis Grain Exchange September was up 1 cent to US$5.08 and Kansas City Board of Trade was up 1 cent to US$5.18 3/4 a bushel.

 

The adverse weather took its took as the HRS crop deteriorated further in the week ended July 2, the U.S. Department of Agriculture reported Monday. Spring wheat was rated 20% in poor-to-very poor condition, versus 17% the previous week. The crop's good-to-excellent ratings fell to 52%, versus 57% the previous week.

 

In a Dow Jones Newswires index, where a value of 100 is considered normal, the U.S. HRS crop was ranked at 90.4%, down from 93% the previous week and 108.4% one year ago.

 

Further damage to the HRS crop is expected this week, as the hot and dry conditions continue during a critical development phase. South Dakota's crop is 96% headed and North Dakota's is 70% headed.

 

Mostly dry conditions are forecast for the northern Plains this week, with near- to above-normal temperatures, the DTN Meteorlogix weather service said. Scattered, light showers are possible in western areas this weekend, and temperatures are seen easing to near to below normal on Sunday.

 

Meanwhile, 65% of the U.S. winter wheat crop was harvested as of June 2, versus 53% the previous week. Kansas - the nation's largest winter wheat producer - was 95% harvested, the USDA said.

 

Midwestern soft red winter growing areas are expected to see mostly dry conditions this week for the harvest, with chances for scattered showers in the west on Sunday, Meteorlogix said.

 

Deliveries posted against CBOT July wheat totaled 455 notices. The large stoppers included ABN Amro at 189, Dowd Wescott at 154 and Fortis with 60, the exchange reported.

 

At the KCBT, 378 delivery notices were posted. The main stoppers included ADM with 386 and J.P. Morgan at 61, the exchange reported.

 

No deliveries were made at the MGE.

 

In news, any further deterioration to global wheat crops "will add further upside to price," National Australia Bank said Wednesday. U.S. crops have been cut by drought and Australia's southwestern wheat belt is also dry.

 

Ukraine's wheat harvest, meanwhile, is expected to increase 5% over last season to 12.5 million tonnes.

 

In export news, Japan is seeking 40,000 metric tonnes of U.S. wheat for shipment Sept. 1-30, in a tender to be held Thursday. It also seeks 20,000 tonnes of Canadian and 20,000 tonnes Australian wheat.

 

The Philippines is expected to buy 30,000 tonnes of optional-origin wheat for September shipment on Thursday.

 

Technically, December CBOT wheat hit a four-week high Monday and bulls are gaining technical momentum, but it will take a close above US$4.25 to show more solid bullish momentum and provide a retest of the recent highs, an analyst said.