July 18, 2006

 

US Wheat Outlook on Tuesday: 1-2 cent higher as crop conditions worsen

 

 

Traders and analysts expect U.S. wheat futures to open 1 cent to 2 cents higher Tuesday on a firmer overnight trade and further deterioration in hard red spring conditions because of drought, sources said.

 

In overnight trade basis September contracts, Chicago Board of Trade wheat was up 1 3/4 cents at US$3.94 3/4, Kansas City Board of Trade was up 1 1/4 cents at US$4.92 and Minneapolis Grain Exchange was 1 3/4 cents higher at US$5.04 a bushel.

 

Drought has taken the northern Plains' HRS crop condition to 32% poor to very poor in the week to July 16, up from 27% the previous week. The amount of the crop in good-to-excellent shape was just 34%, down from 42% the previous week.

 

The six-state average for HRS wheat, where 100 is considered a normal crop, declined to 80.2, versus 84.7 the previous week, according to a Dow Jones crop index.

 

Top producer North Dakota's crop is 34% poor to very poor, and the state continued to suffer from "dry conditions and extreme heat," the state's weekly crop condition report said.

 

Limited precipitation and above-normal temperatures further depleted available soil moisture in North Dakota. A full 45% of the state's top soil moisture was very short, with 42% short and just 13% adequate.

 

The northern Plains were mostly dry in the last 24 hours and high temperatures ranged from 93 to 99 Fahrenheit, DNT Meteorlogix said. Mostly dry conditions are expected to continue this week, with a few isolated showers in eastern areas. Readings are expected to range from the upper 80s to the low 100s.

 

The six- to 10-day outlook calls for above normal to much above normal temperatures and near to below normal rains.

 

While Manitoba is in need of rain with much of the province seeing 40% to 60% less rainfall than average, it is not yet in a drought, the government's crop report for the week to July 16 said. The driest conditions were seen in the west, but even central and eastern areas saw only scattered showers last week.

 

Most of Manitoba's spring wheat has flowered and is now filling heads. The spring crops are maturing fast with the hot, very dry weather.

 

Meanwhile, nine deliveries were posted against CBOT July wheat. No deliveries were reported at the KCBT and MGE.

 

In export news, Japan expects to buy 91,000 metric tonnes of wheat in a Thursday tender, 50,000 tonnes of which are U.S. origin. The rest of the shipment will be 20,000 tonnes of Canadian and 21,000 tonnes of Australian wheat, which is scheduled to arrive in Japan Sept. 1-30.

 

Iraqi officials said the country will buy 100,000-150,000 tonnes of wheat from the international market within the next few days. They also said that Baghdad hasn't put any barriers on purchases from Australia.

 

Syria canceled a tender for the sale of 100,000 tonnes of wheat, which was scheduled for Aug. 15 to Oct. 15 shipment.

 

Technically, bears are gaining momentum after December CBOT wheat closed near the session low and at a fresh two-week close Monday. It will take a close above technical resistance at US$4.25 to revive the bulls, an analyst said. A close below last week's US$4.10 low would provide bears with increased downside momentum.

 

First resistance on Dec CBOT wheat is at US$4.15, then US$4.22 1/4, while support is pegged at US$4.12 and US$4.10.