August 4, 2006

 

US Wheat Outlook on Friday: Up 3-5 cents on estimates, floor strength

 

 

U.S. wheat futures expected to open 3 cents to 5 cents a bushel higher Friday on a firm overnight trade, friendly crop estimates and spillover from expected higher openings in corn and soybeans, sources said.

 

In overnight trade basis September contracts, Chicago Board of Trade wheat was up 3 3/4 cents at US$3.99, Kansas City Board of Trade was up 5 1/2 cents to US$4.90 and Minneapolis Grain Exchange was up 5 1/4 cents to US$4.81 1/4 a bushel.

 

Wheat futures closed mixed Thursday as late fund and speculative selling hit the Chicago market and took prices down into the closing bell. Kansas City futures were also dragged lower, though Minneapolis managed to hold higher ground.

 

Wheat futures for much of Thursday, however, were higher on good weekly export sales that set a high for the marketing year and ongoing talk of possible export business to China, Iraq and India, a broker said.

 

So far, India has not received any bids offering U.S. wheat in its latest buy tender of 400,000 metric tonnes. No company has specifically offered wheat from the U.S., although two bidders - Concordia and Cargill - have named several countries as possible sources of origin, a senior official with India's State Trading Corp. told Dow Jones Newswires Friday.

 

The market is expected to receive support from a friendly crop estimate from the Canadian Wheat Board Thursday, said Brian Hoops, senior market analyst and president of Midwest Market Solutions in Yankton, S.D.

 

The CWB pegged Canada's all-wheat crop at 22.7 million tonnes, versus 23.6 million tonnes in June.

 

A U.S. Department of Agriculture attache recently estimated Canada's wheat production down just slightly at 26.3 million tonnes.

 

Private analytical firm Informa Economics estimated the total U.S. spring wheat crop at 421 million bushels, using an average yield of 29.7 bushels per acre, which Hoops said should be supportive for prices. Informa reportedly pegged the hard red spring portion of the crop at 381 million bushels.

 

The Wheat Quality Council's 2006 spring wheat tour recently pegged the spring wheat crop at an average 31.7 bushels per acre.

 

Meanwhile, Wheat Australia Ltd. is continuing its shipping program to Iraq, as it has a 23,000 metric-tonne cargo scheduled to head out of port next week. Wheat Australia was formed to continue trade with Iraq, after Iraq suspended commercial dealings in February amid allegations that monopoly wheat exporter AWB was involved in illegal kickbacks to Saddam Hussein's regime under the U.N. oil-for-food program.

 

China needs to increase its grain output capacity to 500 million tonnes to meet the country's needs by 2010, the Ministry of Agriculture said Thursday on its Web site. China will need at least 103.33 million hectares of grain acreage to achieve this goal. The amount of land dedicated to grain production, however, is expected to continue shrinking in the years ahead as the population grows and urban areas sprawl.

 

The spring wheat harvest on the northern U.S. Plains is advancing, and traders expect 30%-40% of the crop will be cut by the time the USDA issues its crop condition report on Monday, versus 22% harvested last week.

 

Mostly dry conditions and above-normal temperatures are expected over the northern Plains in the next seven to 10 days, which will favor the harvest, private weather firm DTN Meteorlogix said.

 

A few scattered showers and strong thunderstorms are possible in eastern areas on Saturday, however.