August 7, 2006

 

US Wheat Outlook on Monday: Steady-weak on likely spillover pressure

 

  

U.S. wheat futures are called to open weaker Monday, pressured by overnight weakness on Chicago Board of Trade and likely spillover pressure from neighboring corn and soybean pits.

 

Benchmark CBOT September wheat is called to open steady to 1 cent a bushel weaker.

 

In e-cbot overnight trade, September wheat was unchanged at US$3.96 a bushel and December wheat fell 3/4 cent to US$4.16 1/2.

 

"I think we'll see some initial spillover pressure from corn and soybeans due to the weather, but I don't think wheat is going to be down nearly as much," said a veteran floor analyst.

 

Better-than-expected rains in the corn belt over the weekend are expected to pressure corn and soybeans Monday.

 

Analysts said if Kansas City Board of Trade hard red winter wheat and Minneapolis Grain Exchange spring wheat futures scratch out gains, it's likely CBOT wheat futures will follow. "We have tight hard red and spring wheat stocks and that's going to provide support for wheat," the floor analyst said.

 

DTN Meteorlogix weather said conditions in the North Plains would be mostly favorable for the harvest of the drought-reduced spring wheat crop. Any thundershower activity during the next 7 days will mainly occur in the east and mostly for this coming weekend. Further south, in Argentina, there is no significant rainfall expected in the dry western wheat areas of central Argentina during the next 7 days.

 

Technical analysts said it will take a close back above solid technical resistance at last week's high of US$4.25, basis December wheat, to provide the bulls with fresh upside technical momentum. The next downside price objective for the bears is closing prices below solid support at US$4.10 a bushel. Friday's high is the first resistance, at US$4.22, with further resistance at US$4.25. Friday's low is the first support, which lies at US$4.15 1/2, and then at US$4.10.

 

There isn't much wheat-specific demand news to drive the market, so futures prices might drift, analysts said. "Most eyes are focused on Friday's report," another floor analyst said, referring to Friday's U.S. Department of Agriculture crop production and supply/demand reports.

 

In overseas news, China's wheat prices were largely unchanged last week, though prices dropped slightly in some wheat producing regions due to limited storage space at state-owned warehouses. Analysts in Asia said there might be greater interest in wheat due to adverse weather conditions in Europe, the U.S. and Australia harming crops there. However, they add, a good-sized crop in China could limit demand.

 

India's agriculture ministry has so far received applications from trading companies for the import of more than 1.0 million metric tonnes wheat at a 5% duty, which could underpin prices.

 

Weekly wheat sales in Argentina are running behind last year, at 7.36 million metric tonnes as of Aug. 4, versus 9.76 million tonnes a year ago the Agriculture Secretariat reported Friday.

 

Iraq has asked Australia's AWB Ltd. to compensate it for 420,000 metric tonnes of hard wheat that Baghdad had alleged last year was contaminated with iron dust. The statement also said that the AWB has agreed in principle to compensate Iraq for that amount in condition that Baghdad resumes wheat purchases from the Australian wheat monopoly.