August 9, 2006

 

US Wheat Outlook on Wednesday: Mixed as market seeks direction

 

 

U.S. wheat futures are called to open mixed Wednesday after a two-sided trade in overnight action on the Chicago Board of Trade as the market tries to find direction in a dearth of supportive export news.

 

In e-cbot overnight trade, benchmark September wheat was up 1/4 cent at US$3.84 1/4 a bushel and December wheat fell 1/2 cent to US$4.04 3/4.

 

There is little fresh demand news out for wheat, analysts said, which is causing the market to struggle. Supply news is known, with the drought-damaged spring wheat crop nearly half harvested. Export news could weigh on wheat prices Wednesday. India might buy to 70,000 metric tonnes of wheat from Australia's AWB Ltd. under a recently issued tender to import 400,000 tonnes, a government official said Wednesday. The State Trading Corp of India decided Monday to buy 330,000 tonnes wheat of Russian origin at around US$210-US$212/tonne for delivery in September and October.

 

"This has been a continuing theme in the wheat market. The recent breaks reflect that. Even though we have a short crop (due to drought in the U.S. Plains), we went to prices that were uneconomical as far as exports are concerned," said John Kleist of Kleist Agricultural Consulting.

 

Kleist added the supplies coming from Australia and Russia suggest that, while the U.S. crop is tight, the rest of the world has enough to supply nearby wheat needs.

 

Three South Korean flour mills are jointly seeking 23,200 metric tonnes of U.S. No. 1 wheat in a tender to be concluded at 0500 GMT Thursday, a Daehan official said Wednesday. The shipment is to arrive in South Korea Oct. 10-Nov. 10.

 

Iraq rejected a small amount of German wheat and 100,000 metric tonnes of Thai rice after laboratory tests proved they were contaminated, the Iraqi trade minister said Wednesday.

 

Kleist added with September CBOT wheat holding around the US$3.80s level, this price could spur some interest in U.S. wheat. He said the US$3.80s to US$3.90s seems to be a value area and the last time prices were there it spurred export business.

 

A technical analyst said after Tuesday's move to six-week lows, bears have some fresh technical momentum on their side in CBOT December wheat. It will take a close back above solid technical resistance at last week's high of US$4.25 to provide the bulls with fresh upside technical momentum. The next downside price objective for the bears is closing prices below major psychological support at US$4.00 a bushel. Tuesday's high offers first resistance, at US$4.10 1/2, with further resistance at US$4.15 1/2. First support lies at US$4.03, Tuesday's low, and then at US$4.00.

 

DTN Meteorlogix weather said above normal temperatures and below normal rainfall favor the harvest of the drought reduced spring wheat crop North Plains. Some light to moderate showers and cooler temperatures are expected to develop on Sunday before warmer, drier weather returns next week.

 

The U.S. Department of Agriculture is scheduled to release its August crop production report on Friday. A survey of trade estimates by Dow Jones Newswires shows the all wheat figure at 1.765 billion bushels, down from the July figure of 1.806 billion. All winter is estimated at 1.284 billion bushels, up modestly from July's 1.280 billion. Other spring wheat is estimated at 428 million bushels, down from July's figure of 465 million. The durum crop is seen at 56 million bushels, down slightly from the July estimate of 60 million. New-crop wheat carryout is estimated at 408 million bushels, down slightly from the July estimate of 438 million bushels.