August 19, 2009

 

US Wheat Outlook Wednesday: Down 1-3 cents on spillover, waiting for Egypt

 

 

U.S. wheat futures are expected to start weaker Wednesday amid pressure from outside markets, with traders waiting to see the results of an Egyptian tender.

 

Chicago Board of Trade December wheat is called to open 1 to 3 cents per bushel lower. In overnight electronic trading, CBOT December wheat fell 1 cent to US$4.97 1/4.

 

Losses overnight should set the tone for the opening of trading amid spillover pressure from weak corn, soybeans, crude oil and equities, traders said. Losses in the Chinese stock and commodities markets are spilling over into U.S. grain markets, an analyst said. The firmer U.S. dollar, meanwhile, is seen as bearish because it makes U.S. grain less attractive to foreign buyers.

 

The markets are waiting to see what Egypt, a major wheat buyer on the world market, books in a tender. U.S. wheat is competitively priced, but France has a lot of wheat to sell, a CBOT trader said. Egypt booked French and Russian wheat in its last tender and snubbed the U.S.

 

Even if Egypt buys one or two cargoes of U.S. wheat, the markets should still feel pressure because "macros are negative," a trader said, referring to expectations for losses in equities and oil. Egypt's state-owned General Authority for Supply Commodities, or GASC, said it was tendering to buy 55,000 to 60,000 metric tonnes of wheat on a free-on-board basis but often buys more than that.

 

Weather for wheat continues to look mostly favorable, traders said. The markets continue to watch Australia amid concerns that El Nino could turn eastern growing areas dry.

 

Wheat from northern New South Wales to Queensland is jointing and needs rain to maintain current yield prospects, according to private weather firm DTN Meteorlogix. Moisture is more critical for wheat in the northern part of the area as it approaches reproduction, the firm said. The region would be impacted by dryness if El Nino continues to develop, it said.

 

Drought continues to impact wheat in Argentina, especially in the major western growing areas, according to Meteorlogix. The forecast calls for some chance for showers but also some colder weather during the seven-to-10-day period, the weather firm said.

 

Crops in the Canadian Prairies should benefit as warmer temperatures return during the next few days, Meteorlogix said. However, there may be more cool weather during the six-to-10-day period, especially in the east, the firm said.

 

Harvest delays continue in the northern U.S. Plains due to wet and cool conditions, especially in the east. A drier, warmer period may help improve conditions for the harvest during Friday and the weekend, according to Meteorlogix.