August 14, 2006

 

US Wheat Outlook on Monday: Mixed to weaker following corn, soybeans

 

 

U.S. wheat futures are called to open mixed Monday, but traders and analysts said if corn and soybean futures at the Chicago Board of Trade fall wheat will likely follow suit.

 

Benchmark CBOT September wheat is called to open mixed.

 

In e-cbot overnight trade, September wheat was up 1/4 cent at US$3.74 bushel and December wheat fell 1 cent to US$3.94 1/2.

 

"The news out there for wheat isn't that bad, but with the lousy close on Friday and the follow-through weakness overnight wheat could be pulled lower," said on long-time floor trader.

 

CBOT grain markets fell heavily Friday, based on neutral to bearish data from the U.S. Department of Agriculture, which left its estimate for the other spring wheat crop essentially unchanged from July's figure. The trade expected a crop of 428 million bushels, but USDA estimated other spring wheat 463 million.

 

DTN Meteorlogix weather firm said the forecast for the North Plains calls for showers in the early part of this week, which should cause only minor harvest delays.

 

In the Southern Plains, more rain is needed for the upcoming planting season. Thunderstorms from Kansas southward into Oklahoma and the Texas Panhandle will help to replenish soil moisture but more rain will still be needed.

 

Mild support may stem from export news. Egypt bought 110,000 metric tonnes of U.S. and Canadian wheat, for shipment Sept. 1-15 over the weekend. Egypt purchased 55,000 tonnes of U.S. soft red wheat 55,000 tonnes of Canadian soft red wheat.

 

"It is a little friendly and wheat itself isn't too bad, but I doubt wheat can sustain much strength with Friday's close and spillover weakness" from corn and soybeans, the floor trader said.

 

A technical analyst said near-term chart damage occurred last week in CBOT December wheat prices and bears have technical momentum on their side. It will take a close back above solid technical resistance at last week's high of US$4.10 to provide the bulls with fresh upside technical momentum. The June low of US$3.90 1/2 a bushel is the next bearish target. First resistance is seen at US$4.00 and then at US$4.03 1/2. First support lies at US$3.93 1/2 and then at US$3.90 1/2.

 

Harvest continues in eastern Europe. Russia harvested 33 million metric tonnes of grain to Monday on 12.8 million hectares, which is 29.2% of the total area to be harvested, with an average yield of 2.58 tonnes a hectare, the Agriculture Ministry said. The harvest to date is 21.6% less than a year earlier, and rains have slowed the cutting pace.

 

Belarus harvested 3.511 million metric tonnes of grain to Monday, on 54.1% of the total area to be harvested, compared with 3.456 million tonnes a year, according to the agriculture ministry. The average yield to date was 2.94 tonnes a hectare, compared with 3.19 tonnes/hectare a year earlier.

 

Ukraine exported 320,900 metric tonnes of wheat in July, the first month of the current marketing year, compared with 233,200 tonnes in July 2005.

 

Dry conditions are worrying Australian farmers. Development prospects for Australian winter crops, including wheat and canola, are on a knife edge, with good rains desperately needed in the near future across most growing areas, according to the latest government, industry and analyst reports.

 

Wheat yields in inland New South Wales, western Victoria, large sections of South Australia and Western Australia are predicted to be below average, with a section in the northern wheat belt of Western Australia predicted in the lowest 10% of historical yields.

 

However, above-average yields are predicted for southern Western Australia, parts of South Australia, northeast Victoria into southern and eastern New South Wales and small parts of Queensland.

 

China's Ministry of Agriculture said the country might be able to increase its annual grain production to 504 million tonnes by 2030 to meet up to 88% of its domestic demand, despite a continuous decrease in grain acreage in the country. Rising yields despite lower acreage will help the country boost production though China will continue to be a net importer of grains in the foreseeable future, said He Bingsheng, director of Research Center for Rural Economy.

 

Planting in Argentina is nearly complete as wheat sowing for the 2006-07 crop stands at 95.5% done, the Buenos Aires Cereals Exchange reported Friday. This puts the planting pace up from 90% a week ago and down just 0.8 points from a year earlier. Farmers have planted 5.18 million hectares so far.

 

In related news, Argentina's 05-06 wheat sales totaled 7.575 million metric tonnes as of August 11, the Agriculture Secretariat reported Friday. That puts sales up from 7.36 million tonnes a week earlier.