July 5, 2007

 

US Wheat Outlook on Thursday: 8-10 cents higher on e-CBOT, solid exports

 

 

U.S. wheat futures are expected to start Thursday's day session 8-10 cents higher per bushel after firmer overnight trade and with support from a sale to Egypt, analysts said.

 

In e-CBOT trading, Chicago Board of Trade September wheat climbed 11 1/2 cents to US$5.94 1/2.

 

Prices are set to rise in early activity following a purchase by Egypt's state-owned General Authority for Supply Commodities, or GASC. While U.S. markets were closed Wednesday in observance of the Fourth of July holiday, GASC said it bought 115,000 metric tonnes of U.S. soft red wheat and 60,000 tonnes of Russian wheat.

 

The U.S. has seen solid export demand for wheat lately, which is supportive for prices, CBOT floor traders said. Egypt, in particular, has been an aggressive buyer on "fairly mild" breaks, a trader said.

 

There was chatter in the market earlier this week that Iraq had finalized deals to buy 300,000 tonnes of U.S. wheat. The U.S. Department of Agriculture on Thursday announced private export sales of 100,000 metric tonnes of U.S. hard red winter wheat for delivery to Iraq in the 2007-08 marketing year.

 

U.S. exporters are required to report to the USDA sales of 100,000 tonnes or more of wheat made in the same day to the same destination by 3 p.m. EDT the next business day, according to the USDA.

 

Jordan said it was tendering to buy 100,000 metric tonnes of hard wheat of any origin. The deadline for bids is July 19, and the wheat is for August shipment on a cost and freight basis.

 

India's State Trading Corporation received seven bids Wednesday for an import tender of 1 million metric tonnes of wheat, all higher than bids received in a previous tender the government held in May. The government didn't buy any wheat in the May tender, since it considered the bids too high.

 

Despite solid export demand, recent technical action suggests a further correction is in store for wheat futures, an analyst said. Price action last Friday and on Monday has produced a "big and bearish" key reversal down on the daily bar chart that provides an early clue that a near-term top is in place, a technical analyst said.

 

The bulls' next upside price objective is to close CBOT December wheat above resistance at US$6.25, the technical analyst said. The next downside price objective for the bears is closing prices below strong support at US$5.57, which would fill on the downside an upside price gap on the daily bar chart that occurred in early June.

 

First resistance is seen at US$6.00 and then at US$6.10. First support lies at Tuesday's low of US$5.88 and then at US$5.80.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is closing December wheat above strong resistance at US$6.20, the analyst said. The bears' next downside objective is closing prices below solid support at this week's low of US$5.88 1/4 a bushel.

 

First resistance is seen at US$6.00 and then at US$6.06. First support is seen at US$5.88 1/4 and then at US$5.80.

 

Hot, dry weather on the U.S. Northern Plains will reduce soil moisture and increase stress to spring wheat during the next three days, DTN Meteorlogix said in a forecast. This is especially likely in Montana, where temperatures will shoot above 100 degrees Fahrenheit, the weather firm said. Soil moisture should sustain crops over central and eastern areas during the hot spell.

 

Hard red winter wheat harvest delays continue for parts of southeast Kansas, Oklahoma and north Texas due to wet weather, but conditions may gradually improve, Meteorlogix said. Outside those areas, there are only a few local harvest delays elsewhere in the Southern Plains due to isolated thunderstorm activity, the weather firm said.

 

The next chance of showers for Australia's wheat appears to be Sunday. Early indications suggest only light showers will fall, although a more widespread rain event is needed, according to Meteorlogix.

 

In Argentina, dry weather is slowing planting and emergence of the wheat crop, especially through the southwest, Meteorlogix said. There is no significant rainfall expected for at least the next seven days.

 

Periodic hot weather and limited rain chances mean increasing stress to crops in Ukraine and southern Russia, Meteorlogix said. Russia harvested 6.5 million metric tonnes of grain to Wednesday, which was 2 million tonnes more than a year earlier, according to the Agriculture Ministry.

 

Russia's grain was harvested on 1.97 million hectares, 703,000 hectares more than the previous year. Amid hot, dry weather this year, the average yield fell to 3.3 tonnes a hectare from 3.52 tonnes last year.