July 13, 2006

 

US Wheat Outlook on Thursday: Lower on follow-through, overnight trade

 

 

Traders and analysts expect U.S. wheat futures to open lower Thursday on follow-through selling from recent weakness and lower overnight prices, sources said.

 

In overnight trade basis September contracts, Chicago Board of Trade wheat was 6 1/2 cents lower at US$4.08, Kansas City Board of Trade was down 7 1/4 cents at US$5.10 and Minneapolis Grain Exchange was 5 cents lower at US$5.19 a bushel.

 

Corn and soybean futures are also expected to open lower, which will likely put additional pressure on wheat prices.

 

Weekly export sales were at the low end of trade expectations and could be a further negative influence on prices, a trader says.

 

The U.S. Department of Agriculture reported a net 201,200 metric tonnes of wheat were sold in the week to July 6, down 33% from the previous week and 50% below the previous four-week average. Shipments totaled 295,100 tonnes, which were down 23% from the previous week.

 

In other export news, Japan bought 80,000 tonnes of wheat for Sept. 1-30 shipment. Of the total, 60,000 tonnes was from the U.S. and 20,000 tonnes from Canada.

 

U.S. northern Plains weather conditions will remain mostly dry this week, with high temperatures soaring to 104 Fahrenheit Thursday and Friday, further stressing the hard red spring crop, the DTN Meteorlogix weather service said. While a few thunderstorms produced more rain than expected in some areas overnight, the moisture will be little help as overall drought conditions for the region continue.

 

The USDA on Wednesday, in its first estimate of the 2006-07 season, cut the U.S. spring wheat crop to 465 million bushels, from 504 million last year.

 

Meanwhile, 181 deliveries were posted against CBOT July wheat, with Dowd Wescott stopping 142 and Tenco stopping 39 of them.

 

At the KCBT, 69 notices were posted, with Term Commodities stopping all of them.

 

Just one delivery was made at the MGE.

 

In other news, chances are slim that an El Nino weather event, and associated below-average rainfall in eastern Australia, will occur this year, Australia's Bureau of Meteorology said. Much of Australia, including key winter crop regions, have had a dry autumn and a dry start to winter, raising concerns about crop production. The USDA on Wednesday cut Australia's wheat crop estimate to 21.5 million tonnes, from 24 million in June.

 

Australia will compensate the victims and their families of a shooting incident on June 21 that killed two people and injured three others, one of which was the bodyguard of Iraq's trade minister. Trade between the countries had been put on hold for a time after it was discovered Australia's wheat monopoly exporter provided millions of dollars in kickbacks to Saddam Hussein's regime under the U.N. oil-for-food program. This latest incident further strained the countries' relationship, though Iraq's trade ministry said that it was now ready to boost trade relations with Australia.

 

Strategie Grains lowered its estimate of 2006-07 E.U. grain production to 259.3 million tonnes, down 3.8 million tonnes from last month and just 1% above last year's output. High temperatures in France, Germany and Hungary are taking their toll on production.

 

Soft wheat production in the E.U. is seen at 115.7 million tonnes, down 2.3 million from last month. The largest reduction came in France, with a 1.9-million-tonne cut to its soft wheat crop and Germany's crop was cut by 500,000 tonnes.

 

The French Ministry for Agriculture and Fisheries estimated the country's soft wheat crop at 35.3 million tonnes, up 1.4% from last year and 4.6% above the previous five-year average.

 

India has cut its supplies of subsidized wheat to try and minimize imports. The government has placed orders to import 3.5 million tonnes of wheat by January 2007 to help run the subsidized programs. Future imports will depend on the sales volumes of these programs.

 

India's monsoon rains from June 1-July 12 are 10% below normal, and the monsoon has not made any progress north-westward since July 11, an official of India's weather bureau said Thursday. New monsoon-friendly weather systems are expected to come up near the Bay of Bengal by the third week in July, however. Monsoon rains are critical for the country's agricultural production.