July 25, 2006

US Wheat Outlook on Tuesday: Called 2-4 cents higher on e-CBOT, spillover

U.S. wheat futures are expected to begin open auction trading 2-4 cents higher Tuesday, on overnight price gains and spillover from expected higher soybeans and corn prices, sources said.

In overnight trading at the Chicago Board of Trade, September wheat gained 3 1/2 cents to US$4.04 per bushel, KCBT Sep hard red wheat rose 4 3/4 cents to US$5.04, while at the Minneapolis Grain Exchange, September wheat ended up 1 3/4 cents higher at US$5.00.

The market should follow the tone in overnight trade, a floor analyst said. Although the weekly spring wheat crop conditions were flat compared to the previous week, people are looking towards yield reports from the spring wheat crop tour that starts Tuesday and are beginning to move away from the condition reports, he said.

The U.S. Department of Agriculture reported Monday that 34% of the U.S. spring wheat crop was in good-to-excellent condition, unchanged from the previous week.

In North Dakota, 32% of the crop was rated in good-to-excellent condition, up 1 percentage point from last week, while in South Dakota, 18 percent of the crop was rated in good-to-excellent condition, four percentage points higher than last week.

In addition, higher soybean and corn prices in overnight trade should also lend a hand, with ratings in both of those crops declining from a week ago, he added.

On technical charts, it will take a close below US$4.08 in CBOT December wheat to provide bears with better downside technical momentum, a technical analyst said. First resistance is seen at US$4.25, and then at US$4.27 1/2. First support is pegged at US$4.18 1/2, and then at US$4.15.

In December KCBT wheat, the next upside price objective is closing prices above the contract high at US$5.39. First resistance is seen at US$5.19 1/2 and then at US$5.25. First support is seen at US$5.12 1/2 and then at US$5.10.

Cash wheat basis bids were mixed Tuesday morning. Hard red wheat basis bids were unchanged to higher with Hutchinson, Kan., unchanged at 10 cents under September.

Spring wheat bids were mixed with Minot, N.D., up 1 cent at 63 cents under September.

Soft red winter wheat bids were mixed with Cincinnati 1 cent higher at 74 cents under the September.

In other wheat news, Japan's Ministry of Agriculture, Forestry and Fisheries is seeking to purchase 129,000 metric tonnes of wheat in a tender to be concluded Thursday, a ministry official said. Forty-one thousand tonnes are expected to be of U.S. origin.

Four South Korean flour mills are jointly seeking 21,500 metric tonnes of U.S. wheat in a tender to be concluded Wednesday, a trader in Seoul said Tuesday.