September 26, 2007

 

US Wheat Outlook on Wednesday: Up on Jordan tender, Australia drought

 

 

U.S. wheat futures are expected to start Wednesday's day session firmer on fresh demand news and fears that Australia's new crop could be as small as the drought-ravaged crop of 2006, traders said.

 

Wheat futures are called to open 8-10 cents per bushel higher. In e-cbot overnight electronic trading, Chicago Board of Trade December wheat closed up 10 1/2 cents at US$8.97 3/4.

 

Jordan overnight said it was tendering to buy 100,000 metric tonnes of wheat, of any origin, on a cost and freight basis. Jordan is looking to buy 50,000 tonnes for shipment during the first half of November and 50,000 tonnes for shipment during the second half of November, an official said.

 

The U.S. hopes to secure some of the business, as there are not many other countries on the export market with an exportable surplus of wheat, analysts said.

 

"We've got some fresh demand popping up," a CBOT floor analyst said. "That's supportive to the wheat."

 

Australia's agriculture minister, meanwhile, said dryness could slash the country's 2007 wheat output to about the same level as in 2006, when production totaled around 10 million metric tonnes. The minister's comment represented the most conservative estimate for the current crop's potential.

 

Wheat fields in South Australia received showers of up to 0.35 inch on Tuesday, and a few sprinkles or very light showers are possible Wednesday in Victoria and New South Wales, according to the DTN Meteorlogix forecast. But any shower activity during the next seven to eight days is expected to be light and mostly confined to Victoria.

 

"Rain is needed through all areas to prevent further declines in yield potential for reproductive to filling wheat," Meteorlogix said.

 

Some analysts said the Australian agriculture minister's unofficial forecast would be supportive to U.S. wheat futures as world wheat stocks are already pegged at a three-decade low. However, other industry members said current global prices already reflect the prospect of another poor Australian crop.

 

Last week, the Australian Bureau of Agricultural and Resources Economics, or Abare, estimated the crop Down Under at 15.5 million tonnes. Australia is usually a top exporter of wheat, along with the U.S. and Canada.

 

In Ukraine, it appears the government will continue to keep most of the country's grain off the world market, analaysts said. The government approved a grain export quota of 1.203 million metric tonnes for Nov. 1, 2007-March 31, 2008. The export quota includes 200,000 tonnes of sixth-grade feed wheat.

 

Russia's wheat exports in July-September, the first three months of the current marketing year, are likely to total 3.75 million-3.9 million metric tonnes. That would exceed the record export of 3.64 million tonnes in July-September 2005, according to the market analyst SovEcon.

 

In other news, the European Council unanimously approved Wednesday to cut out the obligatory set-aside arable land program for the 2008-09 crop season. The change comes in response to the increasingly tight situation on the cereals market.

 

The bulls' next upside price objective is to push and close CBOT December wheat prices above solid resistance at US$9.07, a technical analyst said. The next downside price objective for the bears is closing prices below support at US$8.39. First resistance is seen at US$9.00 and then at US$9.07. First support lies at Tuesday's low of US$8.74 and then at this week's low of US$8.70.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is closing KCBT December wheat above psychological resistance at US$9.00, the technical analyst said. The bears' next downside objective is closing prices below solid support at last week's low of US$8.18 3/4. First resistance is seen at US$8.80 and then at Tuesday's contract high of US$8.87 and then at US$9.00. First support is seen at Tuesday's low of US$8.62 and then at this week's low of US$8.58.