September 12, 2006

 

US Wheat Outlook on Tuesday: Down 1-2 cents; data in line with expectations

  

 

U.S. wheat futures are expected to open 1-2 cents a bushel lower after monthly crop production and supply/demand data from the U.S. Department of Agriculture were mostly as expected, sources said Tuesday.

 

Wheat futures were mixed in overnight trade. Basis December contracts Chicago Board of Trade wheat was down 3/4 cents at US$4.12 1/4, Kansas City Board of Trade was up 2 cents to US$4.80 and Minneapolis Grain Exchange was down 1/4 cent to US$4.59 a bushel.

 

The U.S. balance sheet for wheat was little changed from last month. The USDA did lower 2006-07 ending stocks to 429 million bushels, from 434 million in August, based on a 5 million bushel increase in food use to coincide with the most recent mill grind estimate from the Census Bureau, the government said.

 

U.S. all-wheat production was unchanged in September at 1.801 billion bushels.

 

Some traders and analysts were looking for a greater decrease in U.S. ending stocks, however, which will likely pressure wheat futures, according to Mike Zuzolo, senior grains analyst at Risk Management Commodities Inc. in Lafayette, Ind.

 

Global production and ending stocks, as expected, were lowered. Adverse weather in Australia forced the USDA to lower its production estimate by 2 million metric tonnes to 19.5 million tonnes. Small decreases were also seen in Argentina, the E.U. and the former Soviet Union. Those were offset, however, by increased production in Canada, which was raised to 25.9 million tonnes from 25.5 million last month.

 

Global production overall was lowered by 1.9 million tonnes from August to 596.1 million tonnes. The data were in line with prereport estimates, sources said.

 

World ending stocks for 2006-07 fell to 126.38 million tonnes from 128.42 million last month on lower production and increased exports, the USDA said.

 

"We were expecting a draw in world stocks and we did see almost a 2 million metric tonne drawdown, so it was pretty much as expected," said Brian Hoops, senior adviser and president of Midwest Market Solutions in Yanktonne, S.D.

 

"We'll probably maintain a follower's role right now. I'm calling wheat 1-2 cents lower," he added.

 

An 11.1 billion bushel corn crop was larger than most trade expectations and will likely create spillover pressure in the wheat pit, he said.

 

In other news, 9% of the U.S. winter wheat crop was planted to Sunday, below the 11% sown in 2005 and the 12% five-year average. While plantings are behind, the fact that key growing areas have seen beneficial rains is positive.

 

In export news, Japan seeks 116,000 tonnes of wheat in a tender to be concluded on Thursday, with 55,000 tonnes coming from the U.S., 20,000 from Canada and 41,000 from Australia. The entire shipment is scheduled for arrival Nov. 1-30.

 

Meanwhile, no wheat deliveries were reported Tuesday at the Chicago Board of Trade.

 

Deliveries at the Kansas City Board of Trade totaled 90, while nine were posted at the Minneapolis Grain Exchange.