September 7, 2006

 

US Wheat Outlook on Thursday: Mixed start as consolidation likely

 

 

A mixed start is expected for U.S. wheat futures Thursday as the market could be pressured by ideas wheat should continue to consolidate after the recent rally, but supported by continuing bullish news from Australia's crop regions.

 

Benchmark Chicago Board of Trade December wheat is called to open steady-mixed.

 

In e-cbot overnight trade, December wheat was 1/2 cent lower at US$4.16 1/2.

 

After a softer overnight trade and a weaker close Wednesday, wheat futures could see modest losses on Thursday, with trade choppy. Several analysts said the market is consolidating after a nearly two-week rally and could be waiting for confirmation of bigger export sales. Some export business has come to the U.S., with Egypt's purchase of U.S. soft red winter wheat recently, but analysts said earlier for this rally to continue, it must result in sales.

 

On that note, weekly export sales, normally released on Thursdays from the U.S. Department of Agriculture, are delayed until Friday due to Monday's Labor Day holiday.

 

"You can say if we seen some seasonal pressure from corn and beans wheat might be weaker; it's still dealing with being overbought and the market is trying to find its footing here," said a veteran grain analyst. "Plus, the last time we were up here (in July) we stalled. There might be some hesitation to push it higher."

 

In export news, Tunisia's state-run Office des Cereales seeks up to 200,000 metric tonnes of optional-origin soft wheat Thursday. Traders were unsure if the wheat would come out of the Black Sea region, France or the U.S., due to fairly close pricing between the three into Tunisia.

 

South Korea bought 22,600 metric tonnes of U.S. wheat in a Thursday tender. The wheat shipment will reach South Korea between Nov. 1-30. Japan is tendering for 111,000 tonnes of wheat on Friday.

 

Although CBOT December wheat closed weaker, a technical analyst said bulls still have some upside technical momentum. Their next upside price objective is a close above this week's high of US$4.29. The next downside price objective for the bears is a close below US$4.00. First resistance is seen at US$4.20 and then at US$4.23 1/2. First support lies at US$4.15 and then at US$4.10.

 

Several analysts said US$4 for December CBOT wheat is a key area. It's near the major 45- and 50-day moving averages, which is important to technical traders and there could be commercial interest to get end-user coverage.

 

Another cut to Australia's wheat crop estimate came Thursday from Australian grain services company GrainCorp Ltd. (GNC.AU), which said it's unlikely to receive its volume target of 9.0 million metric tonnes of grain due to dry weather. The company has network of storages facilities. GrainCorp's actual receivals of winter crops in the last crop year ended March 31 were 9.8 million tonnes.

 

In fact, there's some talk in Australia of imports. Thursday, government regulator Australian Quarantine and Inspection Service, said it received some queries about feedgrain imports in the face of a possible sharp downturn in production from winter crops, but agriculture minister Peter McGauran said no applications to import had been received.

 

DTN Meteorologix noted the Southern Plains are entering a rainy period. Thursday and early Friday are expected to be dry, but by the weekend, scattered showers and thundershowers develop. Rainfall should average 0.25-1.00 inch and locally heavier. By early next week, additional scattered showers and thundershowers are possible, favoring the southern and eastern locations. In the six-to-10 day outlook, temperatures average near normal and rainfall is seen near to above normal.

 

In Australia, rains over the past 48 hours will help to improve wheat through Victoria and southern New South Wales and rainfall during the next few days will favor the West Australia wheat belt. Northern NSW and southern Queensland may see a few showers during the weekend but the balance of the seven-day period looks dry. South Australia continues mostly dry during the period.

 

Rainfall late last week in Argentina improved wheat conditions in the southern and eastern belt; however northwest areas missed out on this rain. The forecast shows little, if any, significant rainfall during the five to seven day period.

 

Wheat deliveries against the September CBOT contract totaled 12. Man Financial issued all 12 contracts and stoppers were scattered.

 

At the Kansas City Board of Trade September deliveries totaled 201 contracts. The main issuer was Man Financial issuing 119 contracts. The biggest stoppers were Fimat futures stopping 101 contracts and JP Morgan stopping 100 contracts.

 

At the Minneapolis Grain Exchange September deliveries totaled 31 contracts. Frontier Futures issued all 31 contracts and Fimat stopped all contracts.