August 31, 2006

 

US Wheat Outlook on Thursday: Up on global wheat woes, charts

 

 

Continued fundamental and technical strength is expected to underpin U.S. wheat futures on Thursday, following strength in the Chicago Board of Trade's e-cbot platform and continued concerns over global wheat stocks.

 

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

 

In e-cbot overnight trade, September wheat was up 1 cent to US$3.98 1/2 bushel and December wheat rose 1 cent to US$4.17 1/2.

 

After a 4% rally in CBOT wheat on Wednesday, analyst see the market consolidating those gains, but continuing firmer as technical charts lending support.

 

Analysts in Kansas City said with technical charts now following fundamentals higher, "end users can no longer be patient to buy breaks, it's now time to reach for coverage. This is what got into the market (Wednesday), an unending cycle of first end user demand followed by fund demand then additional end user demand." In Wednesday's rally, December wheat hit four-week highs, pushing above a solid downtrend line drawn off the May, July and early-August highs, a bullish clue, a technical analyst said. The bulls have better upside technical momentum after Wednesday's big gains and now a close above solid resistance at the August high of US$4.25. For bears, the downside price objective is a close below US$4.00. First resistance is seen at US$4.19 and then at US$4.25. First support lies at US$4.10 and then at US$4.05.

 

Thursday's U.S. Department of Agriculture weekly export sales were 435,400 metric tonnes, versus trade estimates of 300,000 to 500,000 tonnes. These were 11% above the previous week, but 1% under the prior 4-week average. Nigeria was the biggest buyer at 55,000 tonnes.

 

In its weekly tender, Japan bought 93,000 tonnes of wheat, 66,000 tonnes from the U.S., 16,000 tonnes from Canada and 11,000 tonnes from Australia.

 

Some September-December spreading might be seen after larger-than-expected deliveries. First notice day deliveries against the September wheat contract were heavy at 3,204 contracts. Major issuers were the customer account of ABN Amro issuing 2,242 contracts and ABN Amro's house account issuing 310. ADM Investor Inc's house account issued 600. Stoppers were Term Commodities stopping 1,026 contracts, the customer account of Bear Stearns stopping 600 contracts and Banc of America stopping 549. Other stoppers were scattered.

 

That could put some pressure on nearby CBOT wheat.

 

At the MGE Country Hedging delivered all 934 contracts of wheat. Stoppers included ADM Investor Services stopping 273 contracts, General Mills stopping 161 contracts and Prudential stopping 128 contracts. At the KCBT, ADM Investor Services house account delivered all 900 contracts and Man Financial customer account stopped 531 contracts.

 

The market will likely continue to watch the situation in Europe. French milling wheat futures traded on Euronext.liffe surged to contract highs again early Thursday in solid trade, following the CBOT rally. "Every time we get a report, the crops keep getting smaller," the broker added.

 

DTN Meteorologix said Europe continues to see showers from France eastward to Poland and over the west part of the former Soviet Union. While that will improve soil moisture for the next winter wheat and winter rapeseed crops but is delaying field work and summer crop harvests. There's little chance for rain in the southern hemisphere wheat areas. Australia is seen dry or with only a few light showers through major wheat areas during the next five days. Argentina's wheat areas are expected to see only scattered showers are possible through wheat areas during Thursday night and Friday. These should be mostly light.

 

Belarus said it is 1.17 million metric tonnes of feed grain short of the requirement for the 2006-2007 marketing year and a ban on the export of grain had been imposed.

 

Belarus' agriculture ministry said imports would be carried out by grain processors, and must be completed before Oct. 1. Belarus harvested 5.494 million tonnes of grain to Aug. 31 on 86.7% of total area versus last year's harvest of 6.267 million tonnes at 96.8% complete. Harvest has been disrupted by heavy rains.

 

India isn't planning to cut the import duty on wheat from the current 5% and will review the situation in December, a finance ministry official said Thursday. In late June India temporarily cut the import duty on wheat to 5% from 50% until December 2006. Since June 29, India issued permits to import 2.912 million metric tonnes of wheat at 5% duty by December 2006.

 

The U.S. plans to again take up the possibility of wheat sales to India at a diplomatic level, and the country's ambassador may soon discuss the issue with India's Food Minister Sharad Pawar, an official from the U.S. Department of Agriculture said Thursday. The two countries last held talks on wheat sales in February.