August 14, 2007

 

US Wheat Outlook on Tuesday: Up on Egypt tender, reduced French crop

 

 

U.S. wheat futures are expected to start Tuesday's day session solidly higher on a new Egyptian import tender, a lower estimate for French production and firmer overnight trade, analysts said.

 

Wheat futures are called to open 8-10 cents per bushel higher. In e-CBOT overnight trade, Chicago Board of Trade September wheat climbed 15 1/2 cents to US$6.82, and CBOT December wheat ended up 11 1/2 cents at US$7.02.

 

Prices rose sharply in the final minutes of the overnight session as European production estimates were lowered and Egypt prepared to buy, said Arlan Suderman, analyst with Farm Futures.

 

Egypt's state-owned General Authority for Supply Commodities said after Monday's close it was tendering to buy at least 55,000 to 60,000 metric tonnes of wheat for shipment Sept. 16-30 on a free-on-board basis. During the weekend, GASC said it had bought 115,000 tonnes of Russian wheat in another tender.

 

GASC's decision to issue another tender so quickly shows Egypt really needs wheat, a CBOT floor broker said. The news is supportive, although Egypt has become a regular buyer lately and its tenders are being factored into the market somewhat, he said.

 

Japan, meanwhile, said it was seeking 70,000 metric tonnes of U.S. wheat in a routine tender to be concluded Thursday. The entire shipment is expected to arrive Oct. 1-Nov. 15.

 

"Traders are afraid to sell this market as long as export demand remains strong," Suderman said in a market comment. "That's the primary thing that's holding the market at this point. There's a lot of pent up emotion in the wheat pit that could go either way. A strong close is needed today to sustain the bull."

 

The French state grains board, L'Office National Interprofessionnel des Grandes Cultures, or ONIGC, pegged France's 2007-08 soft wheat production at 32.5 million metric tonnes, down 2.5% on the year. The latest estimate is down 1.5 million tonnes from the board's previous estimate in late July.

 

The lower estimate is bullish because it shrinks world supplies at a time when they are already historically tight, traders said. The board said adverse weather this season stressed France's wheat crop.

 

In the coming days, England and France look to be wetter, while Germany and Poland trend drier, according to DTN Meteorlogix. Dry weather is needed to help improve conditions for winter and spring grain harvests.

 

In Australia, the new wheat crop may not reach the earlier forecast 22 million to 23 million metric tonnes in the face of ongoing dry weather in some key growing areas, analysts said. There's still plenty of time for crops to bloom, but concerns are spreading about the impact of ongoing dry weather in Queensland, northern New South Wales, Western Australia's northeast wheat lands and South Australia's Eyre Peninsula, they said.

 

Light to moderate showers are possible in Australia through southeast and east-central wheat areas during the next few days, Meteorlogix said. Rain is most needed through northeast areas as this crop is the first to warm in the spring and needs rain sooner rather than later.

 

In Argentina, more rain is needed to support the crop in most major growing areas but especially in the southwest, Meteorlogix said. There is still some chance for showers later this week or this weekend but the chance has been reduced from yesterday, the weather firm said.

 

The bulls' next upside price objective is to close CBOT December wheat above resistance at the contract high of US$7.10 1/2 a bushel, a technical analyst said. The next downside price objective for the bears is closing prices below strong support at US$6.58.

 

First resistance is seen at Monday's high of US$6.94 and then at US$7.00. First support lies at Monday's low of US$6.79 1/2 and then at US$6.70.

 

At the Kansas City Board of Trade, bulls' next upside price objective is closing December wheat above solid resistance at the contract high of US$6.86, the technical analyst said. The bears' next downside objective is closing prices below solid support at US$6.50.

 

First resistance is seen at Monday's high of US$6.75 and then at US$6.81. First support is seen at Monday's low of US$6.64 1/2 and then at US$6.60.