July 21, 2006

US Wheat Outlook on Friday: Steady-firm start expected, funds eyed

U.S. wheat futures are expected to begin open auction trading Friday at steady levels after Thursday's strong gains and mixed results in overnight activity, sources said.

Continued concerns about hot and dry conditions in European wheat growing areas could influence price direction, sources said.

However, rainfall Thursday in wheat growing areas in Australia could limit the impact, they added.

In overnight trading at the Chicago Board of Trade, September wheat gained 1/2 cent to US$4.07 cents per bushel, KCBT Sep hard red wheat fell 3 1/2 cents to US$4.99, while at the Minneapolis Grain Exchange, September wheat ended up 3/4 cent at US$5.05.

The market should start out steady, a floor analyst said. New contract highs were set in British and French wheat futures overnight but it rained in dry areas of Australia's wheat belt which could temper buying interest, he added.

A lot depends upon what commodity trading funds decide to do, he added. Thursday funds were estimated buying 6,000 contracts at the CBOT.

Market direction will be decided be what the funds and technical traders want to do after Thursday's price action, a floor trader said. The weather in the spring wheat belt is diminishing in importance as the harvest comes online, he added.

Mostly dry weather is expected in the U.S. Northern Plains Friday and Saturday with dry conditions or only a few light showers expected on Sunday, DTN Meteorologix Weather said. High temperatures are forecast to reach the middle 90 degrees to low 100 degrees Fahrenheit. Mainly dry weather with only a few light showers are expected for Monday and Tuesday, with temperatures expected to average well above normal Monday and near to above normal Tuesday.

In the 6-to-10 day outlook, Temperatures are expected above normal and precipitation near to below normal, DTN Meteorologix Weather said.

On technical charts, bulls regained some upside price momentum in CBOT December wheat, a technical analyst said on short covering and technical buying. It will take a close above the July high of US$4.36 1/2 to provide the bulls with better upside technical momentum, he added. First resistance is seen at US$4.26 3/4, Thursday's high and then at US$4.31 1/4. First support is pegged at US$4.20 and then at US$4.14, Thursday's low.

In December KCBT wheat, the next major upside objective for the bulls is closing pries above the contract high of US$5.39, the analyst said. First resistance is seen at US$5.19 and then at US$5.25. First support is noted at US$5.10 and then at US$5.05 1/2, Thursday's low.

Cash wheat basis bids were unchanged to lower Friday morning. Hard red winter wheat bids were mostly unchanged with Hutchinson, Kan., flat at 10 cents under Sep KCBT.

Spring wheat basis bids were unchanged to lower with Aberdeen, S.D. down 8 cents at 33 cents under Sep MGE futures.

Soft red wheat bids were mixed with Evansville, Ind. unchanged at 65 cents under Sep CBOT futures.

In other wheat news, widespread rainfall in Australia Thursday has helped stem a decline in the condition of winter crops, including wheat in western Australia, with additional rain forecast for next week, said Colin Tutt, general manager at the state's logistics concern Cooperative Bulk Handling Ltd., said Friday.

Friday afternoon, the CFTC is scheduled to release the weekly commitment of trader's report for the period ended July 18.