August 6, 2009

 

US Wheat Outlook on Thursday: Down on spillover; markets eye Egypt tender

 

 

U.S. wheat futures are expected to start weaker Thursday on bearish signals from other markets, with traders waiting to see the results of an Egyptian tender.

 

Chicago Board of Trade September wheat is called to open 4 to 7 cents per bushel lower. In overnight electronic trading, CBOT September wheat fell 5 3/4 cents to US$5.23, and CBOT December wheat dropped 6 cents to US$5.50 3/4.

 

Weakness in CBOT corn and soybeans overnight set a bearish tone for wheat, which has been looking to the neighboring markets for direction, traders said. A slightly higher U.S. dollar is seen as "a little negative" for the grains because it makes them less competitive for export business, a CBOT floor analyst said.

 

Traders are waiting for news about an Egyptian tender to buy 55,000 to 60,000 tonnes of wheat on a free on board basis. Egypt, a major wheat buyer on the world market, last week bought 240,000 tonnes of French wheat and 55,000 tonnes of U.S. wheat in a tender.

 

Egypt is expected to favor French wheat on price and quality in the latest tender, according to AgResource Company. Any wheat that is sold would have to originate off of the east coast, the firm said in a market comment.

 

Weekly U.S. wheat export sales were solid for the second consecutive week, traders said. Sales for the week ended July 30 were 559,800 tonnes, above trade expectation for 350,000 tonnes to 550,000 tonnes.

 

Net sales of 552,800 tonnes for delivery in 2009-10 were down 4% from the previous week but up 15% from the prior four-week average, according to the U.S. Department of Agriculture. Top buyers included Nigeria, which booked 102,500 tonnes; Japan, which bought 87,700 tonnes; and China, which bought 56,900 tonnes switched from unknown destinations, the USDA said.

 

In other export news, Japan said it bought 148,000 tonnes of wheat, including 106,000 tonnes from the U.S., in a routine tender concluded Thursday for delivery in October. The remainder of the wheat came from Canada and Australia.

 

Traders are concerned about dryness in Australia and Argentina, which are expected to be "arid" until Aug. 20, according to AgResource. Argentina's production and exports are expected to suffer this year due to the lack of rain and a sharp drop in planted area.

 

"Crop worry is growing," AgResource said.

 

Still, world wheat supplies are considered ample, traders said. In spring wheat areas of the northern U.S. Plains, episodes of rain and near to below normal temperatures will favor the filling crop but are unfavorable for the maturing crop and the early harvest, according to private weather firm DTN Meteorlogix.

 

The next key upside objective for bulls is to close CBOT December wheat above the July 20 daily swing high at US$5.80, a technical analyst said. The next key downside target for wheat bears is major support at US$5.32 3/4, the July 29 daily low and the bottom edge of July's trading range, he said.

 

"The market has dipped back within the sideways price range, which confined market action for most of July," he said.