August 15, 2006

 

US Wheat Outlook on Tuesday: Steady-firm on oversold ideas

 

 

U.S. wheat futures are called to open steady to firmer Tuesday, on ideas the recent weakness across the Chicago Board of Trade grain and oilseed markets is overdone.

 

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

 

In e-cbot overnight trade, September wheat was up 1 1/4 cents at US$3.75 1/4 bushel and December wheat rose 1/4 cent to US$3.94 1/2.

 

"The whole floor seems like it has a firmer tone to it. We've been beaten down so far so fast and we're due for a bounce. Wheat (has not) fallen so much, but wheat did equal the low from mid-June," said Vic Lespinasse, floor broker at A.G. Edwards.

 

DTN Meteorlogix weather firm said the forecast for the North Plains remains conducive for harvest, although showers during the next few days may cause a few slow downs.

 

In the Southern Plains thunderstorms are seen from southern Kansas southward into Oklahoma and the Texas Panhandle during Tuesday and in the northern areas during Wednesday and Thursday. Rain is needed to help recharge soil moisture for the next winter wheat crop.

 

Argentina's wheat areas are expected to be dry or with only a few light showers in the east during the next 7-10 days. It may be very cool at times and rainfall is needed to favor slowly developing winter wheat, especially in the west.

 

A technical analyst noted despite CBOT December wheat closing near the session high on Monday, serious near-term chart damage has occurred recently. It will take a close back above psychological resistance at US$4.00 to begin to provide the bulls with some fresh upside technical momentum. The next downside price objective for the bears is closing prices below US$3.89 1/2 a bushel. First resistance is seen at US$3.96 and then at US$4.00. First support lies at US$3.89 1/2 and then at US$3.85.

 

Spring wheat harvest is at 69% complete as of Sunday, versus 49% cut the week prior, according to the U.S. Department of Agriculture.

 

"That's moving rapidly along and that's what you have with a drought-hit crop," Lespinasse said.

 

In other news, this year's U.K. wheat crop quality is so far in line with last year's harvest, but a sizable amount is still waiting to be cut, according to a report by U.K. grain merchant Grainfarmers, released Tuesday. Up to 70% of the wheat in southern areas had been cut by Monday, but areas in Lincolnshire, Yorkshire and further north were at best 50% done, the report said.

 

Ukraine's grain stocks on Aug. 1 totaled 11.53 million metric tonnes, 3.41 million tonnes less than a year earlier, the State Statistics Committee reported Tuesday. Wheat stocks totaled 6.92 million tonnes, compared with 9.99 million tonnes on Aug. 1, 2005.

 

Forecast production of winter grains in Western Australia state remains in a range of 6 million metric tonnes to 9 million tonnes, despite recent light rains, a spokeswoman for storage and handling concern Cooperative Bulk Handling Ltd., or CBH, said Tuesday. If the lower level of CBH's estimated range comes to pass, production could fall by more than half from an actual 12.6 million tonnes last crop year ended March 31, of which 70% was wheat.

 

"They really do need the rain there, but wheat is remarkably resilient. You can never count it out until it's harvested," he said.