September 22, 2006

 

US Wheat Outlook on Friday: Down 2-3 cents on weak e-CBOT, more acres

  

 

Traders and analysts expect U.S. wheat futures to open 2 cents to 3 cents a bushel lower Friday as prices pull back from recent gains and on a report forecasting a jump in U.S. planted acres this year, sources said.

 

In e-cbot trade basis December contracts, Chicago Board of Trade wheat was 2 3/4 cents lower at US$4.18 3/4, Kansas City Board of Trade wheat was down 2 1/2 cents at US$4.81 3/4 and Minneapolis Grain Exchange wheat was down 2 cents to US$4.63 1/2.

 

Corn and soybean futures are also called steady to weak, which will likely provide light spillover pressure in wheat, a trader said. Wheat futures are expected to continue finding underlying support on concerns over short Australian and Argentine crops due to drought and hopes that the U.S. will secure a portion of any potential Iraqi wheat purchases, which may help limit market losses, he added.

 

Meanwhile, Informa Economics pegs 2007 wheat planted acres at 62.5 million, up from the U.S. Department of Agriculture's estimate of 57.9 million acres, reports said. While many traders and analysts expect wheat acres to increase this year, this new estimate may be larger than anticipated and will contribute to the bearish tone already in the market, said John Kleist, analyst at Top Third Ag Marketing in Chicago.

 

"It's certainly not a surprise there's going to be more acres, but this could be an extreme," he said.

 

Meanwhile, rainy conditions in the U.S. Plains continue to improve soil moisture levels.

 

Showers and thunderstorms over the central and southern Plains brought 0.25-1.00 inch of rain and locally heavier amounts in the last 24 hours, which will interrupt wheat seedings but give farmers a nice moisture base for the new crop.

 

Mostly dry conditions with a few light showers are expected Friday, with showers redeveloping Friday night into Saturday from northwest to southeast. Light rain and showers are seen on Saturday, DTN Meteorlogix said.

 

Dry conditions are expected Sunday through Tuesday.

 

Technically, CBOT Dec wheat bulls acquired up side momentum with this week's rally and a close above resistance at the September US$4.29 high would provide even greater technical momentum. Bears' objective would be to close prices below solid support at US$4.00, an analyst said.

 

In news, exporter Wheat Australia is talking with the Iraqi Grain Board about possible future sales, a company spokesman said Friday. The Australian Financial Review newspaper reported the company has agreed to a new 300,000 metric-tonne sale of wheat to Iraq. The spokesman, commenting on the report, confirmed the discussions but wouldn't give further details.

 

Australian wheat growers are concerned and are considering withholding deliveries to the collective export pool AWB Ltd. because of the potentially large costs the pool might incur from an investigation into the legality of kickbacks AWB paid to Saddam Hussein's Iraqi regime, said Ray Marshall, grains section president at lobby Western Australian Farmers' Federation.

 

AWB has already flagged direct costs of AUS$20 million from the inquiry, and growers are worried that additional costs associated with tax liabilities and lawsuits could push costs as high as AUS$1 billion.

 

Cash wheat prices in Argentina were higher in the week to Thursday on drought concerns and steady demand from exporters. Export commitments for 2006-07 total 6.7 million tonnes, and assuming 8 million tonnes will be available for export, only 1 million million tonnes remain, Roagro analyst Javier Cabanellas said in e-mailed commentary. Export commitments are more than 10 times the amount seen at this time last year.