July 31, 2006

US Wheat Outlook on Monday: Up 2-4 cents on technical bounce, firm floor

Traders and analysts expect U.S. wheat futures to open 2 cents to 4 cents a bushel higher Monday in a technical bounce from last week and on expected opening strength in corn and soybeans.

In overnight trade basis September contracts, Chicago Board of Trade wheat was up 2 1/2 cents at US$3.91, Kansas City Board of Trade was up 3 cents at US$4.87 and Minneapolis Grain Exchange was 5 1/2 cents higher at US$4.83 1/2 a bushel.

Very hot, dry weather continues to be seen on the northern Plains, but at this late stage of maturity crop ratings are becoming "almost meaningless," said Brian Hoops, analyst and president of Midwest Market Solutions in Yankton, S.D.

"We're starting to get into that harvest point in spring wheat," he added.

Dry conditions with a few light showers are forecast in the northern Plains over the next 48 hours, with mostly dry weather seen Wednesday through Friday, according to weather firm DTN Meteorlogix.

High temperatures will break into the low 80s on Tuesday and Wednesday this week, providing some relief from the scorching heat. Readings will rise to above normal on Thursday and Friday, but will fall to near to below normal for the weekend.

Non-commercial CBOT traders, essentially the funds, decreased short futures positions by 5,436 to total 68,138 contracts in the week to July 25, the Commodity Futures Trading Commission's Commitments of Traders report showed. Commercials increased shorts by 4,503 to total 250,811 positions.

CBOT December wheat incurred near-term technical damage last week, an analyst said. The next downside objective for bears is to close prices below last week's US$4.03 1/2 low. On the other hand, it will take a close above resistance at US$4.25 to provide upside technical momentum.

First resistance on CBOT December is at US$4.10, then US$4.13, while support is pegged at US$4.05 1/2 and US$4.03 1/2.

China's wheat prices were flat in thin trade last week, as state-owned warehouses limited their buying because of rains in northern China and harvesting in the south. Wheat prices in major producing regions were quoted between RMB1,380 and RMB1,440 a metric tonne.

Premiums of wheat delivered to Asia are expected to remain steady this week, as traders eye ocean freight rates and weather-related price moves in Chicago. Sluggish summer demand is offsetting tightness for vessels in the dry-bulk ocean freight market, traders told Dow Jones Newswires.

Wheat lobby Grains Council of Australia said Monday it wants AWB Ltd. to explain how its plans to increase the independence of its international unit AWBI, which together with AWB operates a monopoly over wheat exports, will benefit growers.

AWBI attempts to maximize returns to growers who deliver grain into the collective export sales pool, while AWB's aim is to maximize grower returns.

In export news, Japan is expected to announce details of a planned milling wheat tender to be held Thursday.