July 7, 2006

 

US Wheat Outlook on Friday: Lower amid floor-wide weakness

 

 

Traders and analysts expect wheat futures to open 3 cents to 6 cents lower Friday as prices succumb to weakness anticipated across many agricultural trading pits, amid lower calls for Chicago Board of Trade corn and soybeans.

 

In overnight trade basis September contracts, Chicago Board of Trade wheat was 4 1/4 cents lower at US$4.03, Kansas City Board of Trade was down 6 cents to US$5.12 1/2 and Minneapolis Grain Exchange was 1 1/2 cents lower at US$5.13 a bushel.

 

A mixed close Thursday for U.S. wheat futures, in which some markets were pressured by profit-taking near the end of the session, is expected to be a negative price influence.

 

The largest losses are expected to be seen in Chicago and Kansas City, while weakness in Minneapolis will likely be tempered by forecasts for hot, dry weather in the northern Plains hard red spring areas, a trader said.

 

Mostly below-normal rains and mostly above-normal temperatures will continue to stress crops in the northern Plains, at least during the next five to seven days, the DTN Meteorlogix weather service said.

 

Mostly dry conditions along with a few light showers are forecast for Midwestern soft red winter areas through Saturday. Sunday through Tuesday will bring scattered to widely scattered showers and thunderstorms with rain totals of 0.25-1.00 inch expected, which may slow the harvest in some areas.

 

Wheat export sales for the week ended June 29 -- delayed one day because of the Independence Day holiday -- were a net 298,800 metric tonnes, down 45% from the previous week, the U.S. Department of Agriculture reported.

 

Shipments of 382,100 tonnes were 3% above the previous week but down 12% from the prior four-week average. Cumulative shipments for the 2006-07 marketing year, which began June 1, are 1.619 million tonnes, versus 1.694 million at the same time last year.

 

Traders and analysts are beginning to look ahead to next Wednesday's release of July crop production and supply/demand tables from the USDA, which will include the first spring wheat projection. Informa Analytics reportedly told its clients Friday that it sees U.S. spring wheat production at 475 million bushels, compared to an average of 496 million bushels found in a Dow Jones Newswires survey and down from production of 504 million last year.

 

Meanwhile, deliveries posted against CBOT July wheat totaled 149 notices. The featured stopper was Dowd Wescott at 137, the exchange reported.

 

At the KCBT, 71 notices were posted, with J.P. Morgan stopping them. Fifteen notices were posted at the MGE, and Country Hedging stopped them.

 

In news, South Korea bought 52,500 metric tonnes of optional-origin feed wheat from trading house Concordia in a Friday tender. The wheat is scheduled to reach Inchon, Ulsan or Kunsan port on Nov. 10.

 

A military investigation cleared Australian troops of wrongdoing in the accidental killing of an Iraqi minister's bodyguard last month, a senior Australian commander said Friday. The commander said the investigation found that Australian personnel acted in accordance with the rules of engagement.

 

An Iraqi official said this week that it will not buy wheat from Australia until it formally apologizes for the incident, which was the latest mishap in trade relations that have been strained since it was discovered that Australian monopoly wheat exporter AWB provided millions of dollars in kickbacks to Saddam Hussein's regime under the U.N. oil-for-food program.

 

Western Australia's winter wheat harvest could be cut in half if the current drought intensifies, a spokeswoman for Western Australia's logistics concern Cooperative Bulk Handling Ltd. said Friday. The harvest is expected in a range of 6 million to 9 million tonnes, down from 12.6 million tonnes last year.'

 

In the four months to June 30, much of southwestern Western Australia saw severe rainfall deficiencies.

 

Wheat export negotiations between Russia and China are progressing, and Russian offered to China a number of regions that can export wheat and invited Chinese officials to examine phytosanitary conditions in these Far East regions of Russia, a report from Russia's food market quality watchdog Rosselkhoznadzor said Friday.