September 18, 2007

 

US Wheat Outlook on Tuesday: Up 10-12 cents on Australia crop cut, demand

 

 

U.S. wheat futures are expected to start Tuesday's day session higher on a reduction in Australia's official production forecast and strong demand, traders said.

 

Benchmark Chicago Board of Trade December wheat is called to open 10-12 cents per bushel higher. In e-cbot overnight trading, CBOT December wheat rose 12 cents to US$8.87.

 

The official production forecast for the 2007 Australian wheat crop to be harvested October through December overnight was pegged at 15.5 million metric tonnes, down 31% from an estimate in June. The forecast was up from actual output of 9.8 million tonnes last crop year ended March 31.

 

The estimate - contained in the latest crop report issued by the government's chief commodities forecaster, the Australian Bureau of Agricultural & Resource Economics, or ABARE - is well below the 21 million tonnes forecast for Australia by the U.S. Department of Agriculture. In downgrading its projection, ABARE said most cropping regions recorded below to very much below average winter rainfall.

 

And Australia will see its wheat deteriorate more as the crop enters the critical heading stage of development during the next few weeks, DTN Meteorlogix said.

 

The Meteorlogix outlook for Australia calls for mostly dry conditions Tuesday and a chance for light showers over Victoria and southern New South Wales on Wednesday. Mostly dry conditions should prevail Thursday to Sunday, the private weather firm said.

 

Liffe's European wheat futures traded higher early Tuesday in response to Australia's large cut to its wheat crop forecast. However, gains were limited as the market had anticipated a major cut due to this season's heat and dryness in Australia, traders said.

 

U.S. wheat futures rallied hard going into the close Monday in anticipation of the ABARE estimate, and there could be some "buy the rumor, sell the fact" activity, an analyst said.

 

The trade will be watching to see how end users react to the new, lower estimate for Australia's crop, analysts said. With world supplies shrinking, buyers may step up to the plate to meet their needs, they said.

 

State-run Trading Corp. of Pakistan said it plans to hold an international tender for the import of 300,000 to 500,000 metric tonnes of milling wheat later this week. Pakistan will buy a total of 1 million tonnes in two to three tenders by early December, an official said.

 

Japan said it is seeking 115,000 metric tonnes of wheat in a routine tender to be concluded Thursday for delivery in November. The tender include 75,000 tonnes of U.S. origin wheat.

 

Three South Korean flour mills - Daehan, Daesun and Samhwa - bought 24,100 metric tonnes of U.S. No. 1 wheat from trading house Itochu in a tender concluded Tuesday. The shipment is expected to reach South Korea from Nov. 15-Dec. 15.

 

In a separate tender concluded Tuesday, four South Korean flour mills - Dongah, Daehan, Youngnam and CJ Corp. - bought 23,600 metric tonnes of U.S. No.1 wheat from trading house Columbia Grains. The shipment is expected to reach South Korea from Oct. 25-Nov. 25.

 

At the CBOT, the bulls' next upside price objective is to push and close prices above US$9.07, a technical analyst said. The next downside price objective for the bears is closing prices below psychological support at US$8.00, he said. First resistance is seen at Monday's high of US$8.76 and then at US$8.91. First support lies at Monday's low of US$8.54 1/2 and then at US$8.48.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is closing prices above solid resistance at US$8.80, the analyst said. The bears' next downside objective is closing prices below psychological support at US$8.00. First resistance is seen at Monday's high of US$8.59 and then at US$8.80. First support is seen at Monday's low of US$8.37 and then at US$8.25.